-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, S+wf7PgMrpv0/L1RwK1xXHqwjoV5YXXb0Uk0y+/AZ/adeDPh/g6dHKRyjunFdgIl m6PsB/CdLgEDg9K2LCik4Q== 0000766738-95-000046.txt : 19950414 0000766738-95-000046.hdr.sgml : 19950411 ACCESSION NUMBER: 0000766738-95-000046 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950101 FILED AS OF DATE: 19950403 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENICOM CORP CENTRAL INDEX KEY: 0000766738 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 510271821 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14685 FILM NUMBER: 95526355 BUSINESS ADDRESS: STREET 1: 14800 CONFERENCE CENTER DRIVE STREET 2: STE 400 WESTFIELDS CITY: CHANTILLY STATE: VA ZIP: 22021-3806 BUSINESS PHONE: 7038029200 10-K 1 10KMASTERSECB4PRODTABLE ==================================== 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 1, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to _ Commission File No.: 0-14685 GENICOM CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 51-0271821 (State or other jurisdiction (I.R.S. Employer of Identification No.) incorporation or organization) 14800 Conference Center Drive 22021-3806 Suite 400, Westfields, (Zip Code) Chantilly, Virginia (Address of principal executive offices) Registrant's telephone number, including area code: (703) 802-9200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K X As of February 3, 1995, there were 10,648,299 shares of Common Stock of the Registrant outstanding. The aggregate market value of the shares of Common Stock held by non-affiliates (without admitting that any person whose shares are not included in determining such value is an affiliate) was approximately $10,731,847 based upon the closing price of the shares in the NASDAQ over-the-counter market on February 3, 1995. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for Fiscal Year Ended January 1, 1995: Parts I and II. Portions of the Registrant's definitive proxy statement with respect to the Annual Meeting of Stockholders to be held on April 27, 1995: Part III GENICOM Corporation and Subsidiaries Form 10-K Index PART I Item 1. Business 3 Item 2. Properties 11 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security 12 Holders Executive Officers of the Registrant. 13 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 14 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of 14 Operations Item 8. Financial Statements and Supplementary Data 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial 14 Disclosure PART III Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 15 Item 12. Security Ownership of Certain Beneficial Owners and Management 15 Item 13. Certain Relationships and Related 15 Transactions PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15 Signatures 19 Index to Financial Statements and Schedules F-1 Index to Exhibits E-1 GENICOM Corporation and Subsidiaries PART I Item 1. BUSINESS GENICOM Corporation ("GENICOM" or the "Company"), through its worldwide operations, designs, manufactures, markets and services a wide range of computer printer technologies for general purpose applications as well as a line of hermetically sealed relays. Through its Enterprising Service Solutions business, GENICOM provides multivendor depot and field support, express parts and professional services. Printer Products The Company offers a wide range of serial (one character at a time), line (one or more lines at a time) and page (one page at a time) printers, with performance features and prices suitable for a varied range of printing applications. Besides offering a wide range of technologies and print speeds, GENICOM's printers offer multiple combinations of features that make them suitable for diverse applications. Such features include multiple copy and extensive paper handling capabilities, multiple type styles (fonts), color printing and bar codes. GENICOM's printers are used with desktop workstations and with various networks and stand alone configurations in conjunction with micro, mini, super-mini and mainframe computers. GENICOM also manufactures and sells spare parts and supplies. Supplies include items that have a relatively short life such as printer ribbons and cartridges, while spare parts include items that have generally a longer life such as print heads and printed wire boards. The following table reports the composition of printer sales:
1994 1993 1992 ---- ---- ---- Impact Printers 46.2% 53.9% 59.1% Nonimpact Printers 9.3% 9.7% 3.4% Spares 11.7% 9.7% 13.3% Supplies 32.8% 26.7% 24.2% ---- ---- ---- Total Printer Products 100.0% 100.0% 100.0% ====== ====== ======
In 1994, sales of printers and related products accounted for 64.8% of GENICOM's revenues as compared to 72.3% for 1993 and 72.0% for 1992. The following table sets forth a summary of certain performance features of GENICOM's principal printer products. Manufacturer's List Price Range is as of January 1995, except for the 7900 Series which was introduced in March 1995. Sales price may vary depending on features installed, customization, discounts and other factors. Year Volume Manufacturer's Printer Shipments Draft Suggested Product Began Technology Print Speed Features Options List Price Family Type Range Impact - Serial 2000 1980 9 wire 60 to 150 teleprinters paper handling $ 2,906 - Series serial cps for desktop options, $ 3,008 matrix applications current interface and pedastal 3000 1983 9 or 18 240 to 400 wide range of additional $ 2,079 - Series wire cps models for fonts, graphic $ 3,130 parallel or different buffer staggered environments, expansion, serial color and bar paper matrix codes handling options 3800 1989 18 wire 600 cps high-speed, additional $ 2,125 - Series parallel network fonts, $ 2,499 serial printer, oversize matrix advanced paper characters and handling and DEC LA210, single/dual pedestal and path, postnet paper handling and bar codes options 3900 1990 18 wire 600 cps designed for additional $ 2,999 - Series parallel attachment to fonts, $ 4,520 serial IBM 3270 pedestal and matrix controllers paper handling (coax) and IBM options Systems 3X or AS/400 (twinax), high- speed, advanced paper handling and bar codes Impact - Line 4000 1986 shuttle 400 to heavy-duty additional $ 6,195 - Series matrix line 1400 lpm cycle, fonts and $10,158 printer maintenance paper motion free features, detector QMS advanced paper bar codes handling, graphics and bar codes band line 800 to fully-formed special $ 8,685 - printers 1200 lpm letter quality character $11,990 print, rugged bands band printer features and postnet 4500 1986 shuttle 1200 to designed for additional $ 7,790 - Series matrix line 1400 lpm attachment to fonts $11,158 printer IBM 3270 QMS bar codes controllers (coax), IBM Systems 3X or AS/400 (twinax) and bar codes 4800 1994 shuttle 400 to reliable, low QMS & IPG $ 5,995 - Series matrix line 800 lpm cost of graphics IBM $ 8,013 printer ownership twinax and printer coax designed for connectivity to Ethernet, TCP/IP, Token Ring, AT&T SSI and LANS 4900 1994 shuttle 400 to designed for additional $ 7,047 - Series matrix line 800 lpm attachment to fonts QMS/IGP $ 9,265 printer IBM 3270 bar codes controllers (coax), IBM Systems 3X or AS/400 (twinax) and bar codes Nonimpact 7000 1992 page 10 to 17 desktop, interconnec- $ 995 - Series printers ppm most network and tion with $3,979 (laser) transfer multiuser Geniscript, page and printer at environments, (Postscript thermal 2.5 min per high language transfer page resolution, compatible printer multiple interpreter), resident multipurpose fonts, PCL5 & feeder, PCL5E versatile compatible, input/output supports paper handling various paper devices and sizes duplexing including large format printing up to 11" x 17" 7900 1995 page 10 to Multiuser, IBM MarkNet $ 1,399 - Series printers 16 ppm client server internal $ 5,665 (laser) environments, network full IBM 4028 adapter IPDS connects up to emulation, 18 different PCL5E & operating Postscript systems, Level 2 versatile compatible up input/output to 1200 dpi, paper handling bar codes, devices and labels, duplexing, graphics, various memory electronic options forms 9000 1994 page 8 to 17 ppm desktop, Interconnec- $ 4,195 - Series printers network and tion with $ 4,395 (laser) multiuser Geniscript environments, (Postscript high language resolution, compatible multiple interpreter), resident multipurpose fonts, PCL5 feeder, compatible, versatile supports input/output various paper paper handling sizes devices and including duplexing large format printing up to 11" x 17" The following are trademarks or registered trademarks of their respective companies: DEC of Digital Equipment Corporation; Geniscript of GENICOM Corporation; IBM and IBM Proprinter of International Business Machines Corporation; PCL5 & PCL5E of Hewlett-Packard Company; Postscript of Adobe Systems, Inc. Definitions: cps-characters per second, lpm-lines per minute, ppm-pages per minute Represents the first year that the Printer Product Family had volume shipments. GENICOM continues to introduce new models within most Printer Product Families.
Service GENICOM performs a wide range of service solutions related activities through its Enterprising Service Solutions business ("ESS"). These activities include the following services for customers of GENICOM manufactured and distributed products as well as products manufactured by others - multivendor services. Serviced products include printers, peripherals, servers, personal computers, workstations, internetworking products, systems, monitors, terminals and storage devices. Preventive Regularly scheduled visits to customer maintenance sites to provide routine maintainance. Depot repair Unit repair or refurbishment in GENICOM's quality controlled repair facility by qualified depot technicians. Onsite support Repair of down equipment accomplished at customer site by qualified field engineers. Technical Phone service for customers and field support engineers providing technical and operating information for products and software. Installation Installation of hardware and software products at customer's site. Training Hands on training for customers, field engineers, and partners at our training facility or at customer's site. Documentation Training and service manuals and videos for a broad portfolio of hardware products. Systems Customer tailored solutions providing integration hardware, software and services to meet unique customer information technology needs. In 1992, the Company began expanding its business in the multivendor service market, due to combined impact of the following: (1) the Company's rationalization efforts in the Waynesboro printer product assembly operation, (2) the recognition that the related labor force was adept at servicing multivendor computer peripheral products, and (3) the Company's existing underutilized manufacturing equipment and quality control procedures and processes which could be utilized in the service process to provide repeatable quality. The Company has been successful in expanding its multivendor service business. As of March 1995, the Company services over 14,000 customers and 350,000 devices through its ESS domestic operations. The Company classifies its service business into two distinct product lines: depot and field repair services. For the depot repair operations in the U.S., the Company has established two facilities: the Waynesboro, Virginia, facility which services printers, keyboards, etc., and the Bedford, Massachusettes, facility which services workstations, systems and monitors. The Waynesboro facility performs services on both GENICOM and multivendor products in high volume, whereas the Bedford facility's primary function is to service multivendor products with complex technologies. For the field repair operations in the U.S., the Company has segregated its operations by geographic location and within each service center by field engineer skill type. The Company deploys over 450 field engineers and 85 service vans from 100 service centers in all 50 states, including all major metro areas. GENICOM also provides its Canadian and European customers parts and services through the Company's international subsidiaries. GENICOM services its Latin American, Middle Eastern, African and Pacific Rim customers through authorized distributors of GENICOM products. ESS revenues, as a percentage of total revenues, were 28.8%, 20.5% and 20.2% in 1994, 1993 and 1992, respectively. Sales and Marketing GENICOM markets its products and services through several domestic and international channels. GENICOM's distribution channels consist of (1) national and regional distributors who sell to value added resellers ("VAR's") and dealers and end users, and (2) a direct sales force which sells to OEM's, end users and value added resellers and dealers. Most printers are available in several standard models, enabling the Company to serve a wide range of customer requirements. A combination of accessories satisfies various printing applications. In addition, standard models are customized for OEM's and end users using GENICOM's manufacturing and engineering design capabilities. No customer accounted for more than 10% of GENICOM's total sales in 1994. ESS has enhanced its sales and marketing abilities through the formation of alliances with its key OEM customers and the acquisition of the business of Harris Adacom Networking Services, Inc. in February 1995. These activities have enabled ESS to expand its offerings to meet a broader range of customer requirements. GENICOM maintains international sales and marketing subsidiaries in Australia, Canada, France, Germany, Italy and the United Kingdom. These subsidiaries offer GENICOM products and services to distributors, small OEM's, system houses, VAR's and retail dealers in over 66 countries in primarily local currencies. See "Business Segment and Geographic Information." Competition Printer Products GENICOM's printer products compete in markets characterized by rapid technological change and strong competition. The Company competes primarily in the medium and high- performance segments of the printer market where users require reliable printers principally for word processing, shared network printing, graphics, bar codes and other business applications. The Company competes against many well-established companies, some with financial, technical and operating resources greater than GENICOM. Such competitors include large computer system manufacturers that produce printers for their own product lines and, in certain cases, for sale to other suppliers or end users. In addition, there are a number of independent printer manufacturers producing printers that compete with those offered by GENICOM. Competitive factors within the printer market include price, performance, reliability, cost of ownership, versatility, ease of maintenance, applications solutions support, after- sales service and support and marketing channels. As the computer industry continues to move toward product standardization and relies less on proprietary designs, GENICOM's challenge is to continue to provide product differentiation based on these competitive factors. The Company believes that its ability to maintain a competitive market position depends on the following: development of applications solutions to customer needs, continued growth of nonimpact printer technologies, sustained migration to shared printing environments, effective channels to market, continued enhancement of the Company's product line and improvements in the Company's productivity. In order to enhance its competitive position in the nonimpact market, the Company purchased Printer Systems Corporation ("PSC") in February 1995. The Company expects this acquisition to broaden its page printer product line, increase its penetration in the IBM compatible market and to build on its value added application solution strategy. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." The Company believes the U.S. printer market as a whole will continue unit shipment growth and to a lesser extent revenue growth through 1997. This growth is attributable to the growth in the nonimpact printer market segment partially offset by the contraction of the impact printer market segment. This market trend should result in nonimpact printer technologies' dominance by 1995, when it is expected to constitute 81.0% of the printer units shipped. Nevertheless, impact printers continue to play a significant role in the printer industry. The serial dot matrix and line printer markets accounted for 19.9% and 3.5%, respectively of the $7.5 billion U.S. printer market in 1993. Serial dot matrix and line printer revenues overall are predicted to decline an average of 23.0% and 13.0%, respectively per year through 1998. However, the high speed segments of the serial dot matrix and line printers markets are expected to decrease at a slower rate than the rest of the impact printer market. The Company is a leader and earns a significant portion of its printer revenues in these high performance impact printer markets, offering high- speed, high performance serial matrix and shuttle matrix line printers. Such printers continue to meet customer application needs not yet satisfied by nonimpact technologies, in such areas as multipart forms, high-volume reliability and low cost of ownership. The Company's nonimpact printer strategy is to compete in the shared or network printer market segment which is anticipated to experience compounded annual growth rate of over 23.0% for unit shipments through 1998. Functionality, paper handling capabilities, applications solutions support and after sales service and support enhance the competitiveness of the Company's product introductions. PSC provides GENICOM's Laser Printing Solutions business with proprietary software and hardware technology for distributed communications, data stream management and imaging with emphasis on complex raster image command languages for laser printers and IBM network transmission protocols. Raster imaging is a widely employed technology used in translation and creation of images for nonimpact printing and other applications. Utilizing PSC expertise, the Company has introduced a new series of desktop laser printer products for small workgroups or departmental printing. Service ESS competes with, among others, independent providers of repair services, the in-house repair centers of OEM's and third party maintenance organizations (TPM's) in providing maintenance and repair services. ESS believes it offers cost-effective maintenance and repair solutions to OEM's and TPM's and, therefore, considers these entities potential customers. In another step to expand its ESS business and to increase its competitiveness, the Company recently acquired substantially all of the assets and certain liabilities of Harris Adacom Network Services, Inc. ("HANS"), including all of the stock of HANS's Canadian subsidiary, Harris Adacom Inc. The acquired operations include HANS's field and depot repair services for computers and computer peripherals which is expected to broaden ESS's core competencies and improve its efficiency. Moreover, HANS's systems integration and network diagnostic and monitoring operations will provide GENICOM new opportunities to provide its customers a total application solution. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." ESS believes that the primary competitive factors in the maintenance and repair industry are price, scope, and quality of a company's maintenance and repair services. Due in part to the capital costs necessary to maintain adequate inventory and equipment to service large OEMs and TPMs, ESS believes the capital constraints of small maintenance and repair companies preclude them from competing with ESS for large programs. ESS also believes that the scope of its maintenance and repair operations and capabilities provides it with competitive advantages over many of its competitors. Relay Products GENICOM offers a line of relays that are used primarily in signal switching applications requiring high functional reliability and product quality. Relay revenues, as a percentage of total revenues, were 6.4%, 6.8% and 7.8% in 1994, 1993 and 1992, respectively. GENICOM sells relay products primarily for aerospace and defense applications, automatic test equipment applications and, to a lesser extent, communication, industrial control and transportation control applications. GENICOM believes that its certified and proprietary designs should enable it to continue to participate in future major space and weapons programs. Relay revenues have declined since 1990 due to decreased spending by defense contractors. There are relatively few competitors in the relay market that GENICOM serves. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." Manufacturing and Depot Repair GENICOM conducts its manufacturing and assembly operations primarily at its facility in Reynosa, Mexico and to a lesser extent at its facility in Waynesboro, Virginia. The Reynosa facility assembles certain impact printer product lines and produces printed circuit boards, high-speed matrix printheads, ribbon cartridges and a variety of conventional electromechanical assemblies. The Waynesboro facility is used for shuttle matrix printer and relay manufacturing. The Company utilizes a third party manufacturer located in the Republic of India to produce certain Company designed products. The Company performs depot repair and distribution services at its Waynesboro, Virginia and Bedford and Framingham, Massachusetts facilities. As a result of manufacturing processes, the Company generates and manages hazardous wastes at its facilities. The Company does not believe that compliance with Federal, State and local regulations will have a material effect on its capital expenditures, financial condition or results of operations. See "Legal Proceedings." Customer Arrangements The major portion of GENICOM's sales of printers and relays is made pursuant to purchase agreements, blanket purchase orders and similar arrangements whereby products are deliverable only after the customer issues a purchase order, release or schedule covering specific numbers of units and specifying firm delivery dates. These arrangements are generally one year in duration with automatic renewal provisions. In addition, such arrangements also contain price protection provisions which provide that if GENICOM decreases its prices, customers will receive the benefit of such price decreases for products then held in inventory. GENICOM's agreements with larger OEM's for printer sales generally require the customer to provide GENICOM with continuously updated forecasts of its requirements and to issue firm orders for deliveries for up to a twelve-month period. Besides revenue from individually negotiated arrangements with companies such as Computervision Corporation, Canon U.S.A., Motorola Computer Group, service contracts comprise the major portion of ESS revenue. The contracts typically cover one or two years, with payment due monthly, quarterly or annually, in advance. Service is available Monday through Friday, during normal working hours, with response times ranging from 4 to 8 working hours in metro areas and less than 16 working hours outside metro areas. Standard depot repair time is five working days. The Company's order backlog at January 1, 1995 was approximately $48.9 million, compared with approximately $34.1 million at January 2, 1994. GENICOM's reportable backlog includes all orders associated with relays, service and those orders for printers, spare parts and supplies for which a delivery date within approximately six months has been specified by the customer. The Company expects to ship substantially all printer, spares and supplies orders in reported backlog within fiscal year 1995. The Company experiences lower sales each year in its third quarter due to European holidays and the two week vacation shutdown of the Company's manufacturing facilities. See "Management's Discussion and Analysis of Results of Operations and Financial Condition", for further analysis of product revenue and backlog trends. GENICOM's working capital practices are consistent with the working capital practices of the printer industry. GENICOM's customer payment terms generally require invoices to be paid within thirty days of the date of issue. To support its ESS business and spare parts business, the Company is required to carry significant levels of spare parts, which were approximately $13.3 million and $14.4 million at January 1, 1995 and January 2, 1994, respectively. Engineering, Research and Product Development GENICOM incurs engineering, research and product development costs for the following purposes: development of new products; applications solutions development; modification, enhancement and achievement of cost reductions for existing product lines; customization of products for OEM's; market research; and development of process inspection criteria to ensure new products are built to specification. GENICOM's expenditures for engineering, research and product development were $7.7 million, $9.8 million and $10.6 million in 1994, 1993 and 1992, respectively. $0.5 million of the 1993 amount related to restructuring costs. In 1994, 1993 and 1992 the Company expended 4.6%, 5.6% and 5.9% of products revenue, respectively, in engineering research and product development. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." GENICOM maintains in-house capabilities and facilities available to support its engineering and design activities. The Company also engages a number of highly specialized independent firms to supplement its own engineering capabilities and to design certain software and components for its products. Proprietary Rights GENICOM relies on patent, copyright and trade secret laws to protect its proprietary and technology rights. GENICOM obtained certain patents, licenses and cross-licenses when it acquired the Data Communication Products Business Department from General Electric Company (collectively "G.E.") in 1983 and when it acquired the Printer related assets of Ekco Group, Inc. (formerly Centronics Data Computer Corporation, "Centronics") in 1987. GENICOM continues to patent certain developments, holds certain patents pending and retains numerous patents expiring at various times between 1995 and 2011. In addition, the Company has a cross-licensing agreement with IBM that expires 17 years after the date of issue of certain patents pending prior to January 1, 1991. "GENICOM" and certain other marks used in connection with the sale of the Company's products are registered trademarks of GENICOM in the United States and, in some cases, certain foreign countries. Under United States law, a registered trademark remains valid for 10 years if affirmed at the end of the sixth year. There is no limit to the number of times the registration may be renewed for additional 10-year periods. Thereafter, each registration may be renewed for additional 10 year periods; otherwise the registration will expire automatically. GENICOM's Laser Printing Solutions strategic business unit specializes in raster imaging technology and has numerous related patents and trademarks such as "Rastek," "MIRROR_5," and "RASTOS." The combined technologies of MIRROR_5, an HP Laserjetr III emulation software package; RASTOS, a printer operating system; and GENICOM's GeniScriptr, a PostScriptr compatible interpreter, will assist in GENICOM's continued penetration into the nonimpact market in 1995. In connection with the acquisition of the printer-related assets of Centronics, GENICOM acquired a license to use the name "Centronics" as a trademark, tradename and service name. ______________ HP Laserjet is a registered trademark of Hewlett-Packard Company. Suppliers GENICOM currently purchases raw materials, components and printers from various domestic and foreign suppliers. GENICOM utilizes supply agreements and other arrangements whereby volume discounts can be obtained. GENICOM purchases certain products -- printers, options, supplies and component parts, including print engines, from sole suppliers who have developed proprietary processes that the Company incorporates into its products. In the event that those suppliers were unable or unwilling to supply these products, the Company believes it could establish alternate sources for these products or similar products. The time required to establish an alternate source could disrupt the manufacture or distribution of these products, thus causing delays that could adversely affect revenues. Currently, the Company considers its relationships with these vendors to be good and does not anticipate any disruption in the supply of these products. For other purchases the Company utilizes multiple suppliers, thus it is unlikely that the loss of any one supplier would have a material impact upon the manufacture or assembly of printer or relay products. In 1994, GENICOM procured 13% of its total purchases from Toshiba Corporation ("Toshiba") which supplies the Company with certain nonimpact printer products. No other supplier accounted for a significant portion of GENICOM's total 1994 purchases. In 1993, no supplier accounted for a significant portion of GENICOM's total purchases. Employees As of January 1, 1995, the Company and its subsidiaries employed 2,382 employees. The Company believes its relations with its employees are satisfactory. The Company's production and maintenance employees at its Waynesboro facility are represented by the United Electrical, Radio and Machine Workers of America Local 124, under a collective bargaining agreement which expires in July 1996. Business Segment and Geographic Information Operation of the Company's subsidiaries in Australia, Canada, Europe and Mexico is subject to various risks associated with political and economic developments in such countries, such as tariffs imposed to discourage imports, varying product standards and specifications, and value added and excise taxes. In addition, GENICOM is exposed to currency fluctuation risks as a result of its international sales and sourcing of products from foreign vendors. Accordingly, sales or cost of components may decrease or increase as the value of the United States dollar appreciates or depreciates relative to the currency of the source country. The Company usually hedges these currency risks through the purchase of forward exchange contracts and expects to continue this practice in the future. In December 1994, the Mexican peso suffered a devaluation of approximately 30%. The impact on the Company's financial position, results of operations and liquidity was immaterial. The peso devaluation is expected to lower the Company's manufacturing costs, but inflation in Mexico is expected to largely offset the benefits of the peso devaluation. Reference is hereby made to Notes 1 and 10 of the Notes to Consolidated Financial Statements incorporated by reference in Item 8 of this report for further financial information by business segment and geographic location. Item 2. Properties The following table sets forth certain information with respect to the Company's owned or leased property as of January 1, 1995:
Square Owned Year Location Principal Uses Feet or Lease Leased Expires - -------- ---------- ------ ------ ---- Chantilly, Corporate 23,000 Leased 1998 Virginia Headquarters Waynesboro, Service, 377,000 Owned -- Virginia Manufacturing, Office Waynesboro, Service and 50,000 Leased 1995 Virginia Manufacturing Reynosa, Manufacturing 120,000 Owned -- Mexico Reynosa, Manufacturing 48,000 Leased 1995 Mexico McAllen, Distribution 37,500 Leased 1997 Texas Bedford, Service 155,000 Leased 1995 Mass. Framingham, Distribution 40,500 Leased 1995 Mass.
GENICOM's leased property is occupied under standard industrial leases. Each lease generally contains an optional renewal provision. The combined capacity of GENICOM's service and manufacturing facilities is 24,000 labor hours per day, of which approximately 32% is utilized. Productive capacity is based on the operation of two shifts at Reynosa, Mexico, Bedford and Framingham, Massachusetts and three shifts at Waynesboro, Virginia. The Company's Waynesboro property is subject to a lien in favor of the Company's lender under its revolving loan agreement. Item 3. Legal Proceedings The Company and the former owner of its Waynesboro facility, G.E., have generated and managed hazardous wastes at the facility for many years as a result of their use of materials such as industrial solvents and heavy metals, like chromium, in manufacturing processes. As a result of permit applications filed by the Company in connection with these activities, the United States Environmental Protection Agency ("EPA") conducted a Resource Conservation and Recovery Act ("RCRA") facility assessment at the site. The EPA determined that releases and potential releases of hazardous wastes into the environment had or potentially could have occurred at the facility and, as a result, a corrective action order process was initiated. The Company and the EPA have agreed to a corrective action consent order (the "Order") issued under section 3008(h) of the RCRA, which became effective on September 14, 1990. The Order requires the Company to undertake an investigation of solid waste management units at its Waynesboro, Virginia facility and to conduct a study of any necessary corrective measures that may be required. Although the Order is currently being implemented, it is not possible for the Company to reliably estimate the total cost of the investigation and the study required by the order. If, as a result of the investigation and study, corrective measures are required, the Company expects that it will then enter into discussions with the EPA concerning a further order for that purpose. On December 9, 1993, the Company entered into a Cooperation Agreement ("Agreement") with G.E. covering certain environmental matters at the Company's Waynesboro, Virginia site. One of the matters covered is the cost of responding to the Order. The Agreement provides that G.E. will bear 70.0% of the allocable costs relating to the Order. In 1993, the Company recorded a $1.2 million recovery from G.E. of previously incurred allocable costs relating to the Order. A dispute has arisen between the Company and G.E. concerning the Agreement. Management believes that the dispute will not have a material effect upon the financial condition, results of operations or liquidity of the Company. As a result of the continuing financial obligation which G.E. has with respect to releases at the facility both under the Agreement and by law and the protracted nature of the investigation, the Company believes that the costs of the investigation and study and any corrective action that may be required are not likely to have a material effect upon the financial condition, results of operations or liquidity of the Company. On January 9, 1992, the Company was notified by the EPA that it is one of 700 potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, for necessary corrective action at a hazardous waste disposal site in Greer, South Carolina. In prior years, the Company arranged for the transportation of wastes to the site for treatment or disposal. Based on information currently available, the Company believes its share of the costs of the investigation and any necessary corrective action is not likely to have a material effect upon the financial condition, results of operations or liquidity of the Company. In the ordinary course of business, the Company is party to various environmental, administrative and legal proceedings. In the opinion of management, the Company's liability, if any, in all pending litigation or other legal proceedings, other than those discussed above, will not have a material effect on its financial condition, results of operations or liquidity of the Company. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Executive Officers of the Registrant The following table sets forth certain information with respect to the Company's executive officers as of January 1, 1995: Name Age Title - ----------- --- ---------------- Paul T. Winn 50 Director, President and Chief Executive Officer James C. Gale 53 Senior Vice President Finance and Chief Financial Officer Raymond D. 55 Senior Vice President, International Stapleton Service Market Development James A. Jones 37 Vice President, Corporate Controller and Treasurer C. Bruce Meyer 45 Vice President Human Resources and Corporate Communications B. Garrett 46 Vice President and General Manager, Buttner Supplies and Service Marketing & Sales Michael J. 46 ESS Vice President and General Manager Shelor Service Logistics & Operations
Mr. Winn joined the Company in April 1990 as President and Chief Executive Officer and became a director in May 1990. Previously, Mr. Winn was employed by IBM Corporation, where he served for 22 years in various capacities, most recently as Vice President of Graphics Systems in the Advanced Work Station Division. Prior to that position, Mr. Winn served as Vice President of Worldwide System Printers, responsible for technology, software, product development and manufacturing. Mr. Gale joined the Company as Senior Vice President Finance and Chief Financial Officer in August 1991. Previously, Mr. Gale was employed by General Foods Corporation, where he served for 25 years in various capacities, most recently as Vice President of Finance for General Foods Corporation and in that role acted as Chief Financial Officer of General Foods, USA. Mr. Stapleton became Senior Vice President International Service Market Development in August 1994 after serving the Company and its predecessor, G.E., in various capacities for 30 years, most recently as Senior Vice President and General Manager Enterprising Service Solutions Division. Mr. Jones has served the Company as Corporate Controller since November 1988, and Treasurer since March 1990. Mr. Meyer was appointed Vice President of Human Resources in September 1991 after serving the Company, and its predecessor, G.E., in various human resources capacities since 1973. Mr. Buttner was appointed Vice President and General Manager, Supplies and Service Marketing & Sales in August 1994 after having served as Vice President and General Manager Supplies Business Unit since April 1993. Prior to his appointment as a corporate officer, Mr. Buttner had served in sales, marketing and business management positions with GENICOM since 1988. Previously, Mr. Buttner was employed by G.E. for 15 years. Mr. Shelor was appointed ESS Vice President and General Manager Service Logistics & Operations in August 1994 after serving the Company and its predecessor, G.E., in various operating positions since 1969. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The information set forth under the caption "Stock Trading" on page 28 of the registrant's 1994 Annual Report to Stockholders is incorporated herein by reference. Additionally, GENICOM has not paid a cash dividend on its common stock. The Company intends to retain earnings from operations for use in its business, and therefore does not anticipate paying any cash dividends in the foreseeable future. Certain of the Company's debt arrangements restrict the payment of dividends unless certain tests are met. Reference is hereby made to Note 3 of the Notes to Consolidated Financial Statements incorporated by reference in Item 8 of this report for further financial information regarding the Company's debt arrangements. Item 6. Selected Financial Data The information set forth under the caption "Eleven Year History" on pages 6 and 7 of the registrant's 1994 Annual Report to Stockholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 9 through 11 and 13 through 14 of the registrant's 1994 Annual Report to Stockholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The information set forth under the captions "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated Statements of Changes in Stockholders' Equity," and "Notes to Consolidated Financial Statements" on pages 8, 12, and 15 through 26 of the registrant's 1994 Annual Report to Stockholders is incorporated herein by reference. The supplementary data regarding quarterly results of operations set forth in Note 11 of the "Notes to Consolidated Financial Statements" on page 26 of the registrant's 1994 Annual Report to Stockholders is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant The information required by this item is set forth under the caption "Election of Directors" in the registrant's Proxy Statement for its 1994 annual meeting of stockholders, to be mailed to each stockholder on or about March 31, 1995, which information is incorporated herein by reference and under the heading "Executive Officers of the Registrant" appearing on page 14 of this report. Item 11. Executive Compensation The information required by this item is set forth on pages 5 through 15 of the registrant's Proxy Statement for its 1995 annual meeting of stockholders, to be mailed to each stockholder on or about March 31, 1995, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is set forth under the caption "Principal Stockholders of the Company" in the registrant's Proxy Statement for its 1995 annual meeting of stockholders, to be mailed to each stockholder on or about March 31, 1995, which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information required by this item is set forth under the caption "Certain Transactions" in the registrant's Proxy Statement for its 1995 annual meeting of stockholders, to be mailed to each stockholder on or about March 31, 1995, which information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Statements and Schedules The financial statements incorporated by reference into this report and the financial statement schedules filed as part of this report are listed in the Index to Financial Statements and Schedules on page F-1 immediately following the signatures to this report. Exhibits Included in Response to Item 601 of Regulation S-K
Number Description - ------ ------------ 3.1 Restated Certificate of Incorporation effective as of June 15, 1992, incorporated by reference to Exhibit 4.1 to Form S-8 Registration Statement (No. 33-49472) filed with the Commission on July 10, 1992. 3.2 By-laws, dated June 1, 1983, as amended January 23, 1989 - incorporated by reference to Exhibit 3.2 to Form 10-K filed with the Commission on March 29, 1989. 4.1 Indenture, between GENICOM Corporation and Bankers Trust Company (the "Trustee"), dated February 13, 1987 - filed herewith. First Supplemental Indenture dated as of March 22, 1991 - incorporated by reference to Exhibit 4.1 to Form S-1 Registration Statement (No. 33-23007) filed with the Commission on May 14, 1991. 10.1 Loan and Security Agreement, dated September 25, 1990 between GENICOM Corporation and The CIT Group/Credit Finance, Inc. (as successor by assignment to Fidelcor Business Credit Corporation) - incorporated by reference to Exhibit 4.1 to Form 10-Q filed with the Commission on November 13, 1990. First Amendment dated May 1, 1991 and Second Amendment dated March 3, 1992 - incorporated by reference to Exhibit 10.1 to Form 10-K filed with the Commission on March 24, 1992. Extension of and Amendment to Financing Agreements dated September 23, 1992 in reference to the Loan and Security Agreement, dated September 25, 1990 between GENICOM Corporation and The CIT Group/Credit Finance, Inc. - incorporated by reference to Exhibit 10.1 to Form 8-K filed with the Commission on October 6, 1992. Extension of and Amendment to Financing Agreements dated June 9, 1994 in reference to the Loan and Security Agreement, dated September 25, 1990 between GENICOM Corporation and The CIT Group/Credit Finance, Inc. - incorporated by reference to Exhibit 10.1 to Form 8-K/A filed with the Commission on July 15, 1994. 10.2 Registration Rights Agreement, dated October 21, 1983, among the Company and the several Purchasers named therein - incorporated by reference to Exhibit 10.2 to the Form S-1 Registration Statement (No. 33-5458) filed with the Commission on June 25, 1986 (the "June 25, 1986 Registration Statement"). 10.3 Registration Rights Agreement, dated December 20, 1984, among the Company and the several Purchasers named therein - incorporated by reference to Exhibit 10.3 to the June 25, 1986 Registration Statement. 10.4 Registration Rights Agreement, dated December 20, 1984, among the Company and the several Purchasers named therein - incorporated by reference to Exhibit 10.4 to the June 25, 1986 Registration Statement. 10.5 Registration Rights Agreement, dated January 3, 1985, among the Company and the several Purchasers named therein - incorporated by reference to Exhibit 10.5 to the June 25, 1986 Registration Statement. 10.6 Registration rights provisions contained in a Stock Purchase Warrant dated October 21, 1983 granted by the Company in favor of General Electric Company, which Stock Purchase Warrant became void after October 21, 1988 - incorporated by reference to Exhibit 10.6 to the June 25, 1986 Registration Statement.
Number Description - ------ ------------ 10.7# Stock Option Plan, as amended and restated, effective as of February 7, 1991 - incorporated by reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10Q (File No. 0-14685) for the quarter ended March 31, 1991 filed with the Commission on May 15, 1991. First Amendment to the Registrant's Stock Option Plan, dated February 3, 1992 - incorporated by reference to Exhibit 4.2 to Form S-8 Registration Statement (No. 33-49472) filed with the Commission on July 10, 1992. Second Amendment to the Registrant's Stock Option Plan, dated January 17, 1994 - incorporated by reference to Exhibit 4 to Form S-8 Registration Statement (No. 33-53843) filed with the Commission on May 27, 1994. 10.8# Deferred Compensation and Savings Plan, as amended and restated, effective as of January 2, 1989 - incorporated by reference to Exhibit 10.8 to Form 10-K filed with the Commission on March 29, 1991. First Amendment to the Deferred Compensation and Savings Plan, dated as of November 1, 1993 - incorporated by reference to Exhibit 10.1 to Form 8-K filed with the Commission on March 30, 1995. Second Amendment to the Deferred Compensation and Savings Plan, dated as of January 20, 1994 - incorporated by reference to Exhibit 10.2 to Form 8-K filed with the Commission on March 30, 1995. 10.9# Defined Benefit Pension Plan for Hourly Employees, as amended and restated, effective as of January 1, 1989 - incorporated by reference to Exhibit 10.9 to Form 10-K filed with the Commission on March 29, 1991. 10.10# Incentive Compensation Plan, as amended - incorporated by reference to Exhibit 10.13 to the June 25, 1986 Registration Statement. 10.11 Lease agreement with respect to the Company's customer service facilities in Waynesboro dated August 1, 1988 - incorporated by reference to Exhibit 10.10 to Form 10-K filed with the Commission on March 29, 1989. Lease agreement with respect to the Company's manufacturing facilities in Waynesboro - incorporated by reference to Exhibit 10.11 to Form 10-K filed with the Commission on March 24, 1992. 10.12 Lease of McAllen, Texas facility, dated January 20, 1992 - incorporated by reference to Exhibit 10.12 to Form 10-K filed with the Commission on March 24, 1992. 10.13# Terms of employment of Paul T. Winn dated March 26, 1990 - incorporated by reference to Exhibit 10.15 to Form S-1 Registration Statement (No. 33-23007) filed with the Commission on May 17, 1990. 10.14Y Agreement Between GENICOM Corporation and TOSHIBA Corporation Relating to Laser Printer G751, Laser Printer G750 and Related Options, Supplies and Service Parts, dated March 31, 1992 - incorporated by reference to Exhibit 10.17 to Form 10-K filed with the Commission on March 31, 1993. 10.15 Agreement with the General Electric Company regarding environmental matters at the Registrants Waynesboro, Virginia facility, dated December 9, 1993 - incorporated by reference to Exhibit 10.1 to Form 8-K filed with the Commission on February 23, 1994. 10.16 Lease of Bedford and Framingham, Massachutsettes facilities, dated March 11, 1994 - incorporated by reference to Exhibit 10.1 and 10.2, respectively to Form 8- K filed with the Commission on May 31, 1994
Number Description - ------ ------------ 10.17 Consulting agreement between GENICOM Corporation and W. Allen Surber, dated October 11, 1994 - incorporated by reference to Exhibit 10.17 to Form 10-K filed with the Commission on March 31, 1995 - filed herewith. 10.18# Consulting agreement between GENICOM Corporation and Edward E. Lucente, dated December 6, 1994 - incorporated by reference to Exhibit 10.18 to Form 10-K filed with the Commission on March 31, 1995 - filed herewith. 11 Statement regarding the Company's computation of earnings per share - filed herewith. 13 Portions of Annual Report to Stockholders of GENICOM Corporation for the Fiscal Year Ended January 1, 1995 - incorporated herein - filed herewith. 22 Subsidiaries of the Registrant - filed herewith. 24 Consent of Independent Accountants - filed herewith. 27 Financial Data Schedule - Filed only with EDGAR version. (b) Reports on Form 8-K The Company did not file a Form 8-K during the quarter ended January 1, 1995. Y Confidential treatment granted with respect to certain provisions pursuant to 17 C.F.R. 200.80 (b) (4). # Management contracts or compensatory plans. SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto, duly authorized. GENICOM Corporation BY: Paul T. Winn -------------- Paul T. Winn President and Chief Executive Officer Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date - ----------- -------------- ----- Don E. Ackerman Chairman of the Board and March 31, 1995 - --------------- Director Don E. Ackerman Paul T. Winn President and Chief March 31, 1995 - --------------- Executive Officer Paul T. Winn and Director (Principal Executive Officer) James C. Gale Senior Vice President March 31, 1995 - --------------- Finance and Chief James C. Gale Financial Officer (Principal Financial Officer) Bruce K. Anderson Director March 31, 1995 - --------------- Bruce K. Anderson Edward E. Lucente Director March 31, 1995 - --------------- Edward E. Lucente James A. Jones Vice President, Corporate March 31, 1995 - --------------- Controller and James A. Jones Treasurer
GENICOM Corporation and Subsidiaries INDEX TO FINANCIAL STATEMENTS AND SCHEDULES The consolidated balance sheets of GENICOM Corporation and subsidiaries as of January 1, 1995 and January 2, 1994, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended January 1, 1995, including the notes thereto, are included on pages 8, 12 and 15 through 26 of the Registrant's 1994 Annual Report to Stockholders and are incorporated herein by reference. With the exception of the aforementioned information, and the information incorporated by reference in numbered Items 5, 6, 7 and 8, no other data appearing in the Annual Report to Stockholders is deemed to be "filed" as part of this Form 10-K. The following additional financial data should be read in conjunction with these consolidated financial statements. Page Independents F-2 Accountants' Report Financial Statement Schedules: Schedule II Valuation and Qualifying Accounts F-3 and Reserves
1. All other schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedules. F - 1 INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors and Stockholders of GENICOM Corporation: We have audited the accompanying consolidated balance sheets of GENICOM Corporation and Subsidiaries (the "Company") as of January 1, 1995 and January 2, 1994, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three fiscal years in the period ended January 1, 1995, which financial statements are included on pages 8, 12 and 15 through 26 of the Company's 1994 Annual Report to Stockholders and incorporated by reference herein. We have also audited the financial statement schedules listed in the index on page F-1 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GENICOM Corporation and subsidiaries as of January 1, 1995 and January 2, 1994, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 1, 1995 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Note 4 to the financial statements, effective January 4, 1993, the Company changed its method of accounting for postretirement benefits other than pensions. Coopers & Lybrand L.L.P. - ------------------------ Coopers & Lybrand L.L.P. Washington, D.C. January 31, 1995 except Note 12, for which the date is March 1, 1995. F - 2 GENICOM Corporation and Subsidiaries Schedule II - Valuation and Qualifying Accounts and Reserves (In thousands)
Additions Balance at Charged to Deductions Balance Description Beginning Costs from at End of Period and Reserves of Period Expenses Period -------- -------- -------- ------- Allowance for doubtful accounts Year ended: January 3, 1993 $ 1,527 $ 494 $ 773 $ 1,248 January 2, 1994 $ 1,248 $ 812 $ 580 $ 1,480 January 1, 1995 $ 1,480 $ 365 $ 366 $ 1,479 Allowance for inventory obsolescence Year ended: January 3, 1993 $13,390 $ 2,690 $ 9,227 $ 6,853 January 2, 1994 $ 6,853 $ 2,367 $ 2,483 $ 6,737 January 1, 1995 $ 6,737 $ 2,723 $ 3,302 $ 6,158 "Additions" to the allowance for doubtful accounts include a foreign currency translation adjustment of $56, $(48) and $(100) in 1994, 1993 and 1992, respectively. Net bad debt expense for 1994, 1993 and 1992 was $309, $859 and $594, respectively. Foreign currency translation adjustments were immaterial in 1994, 1993 and 1992.
F - 3 GENICOM Corporation and Subsidiaries INDEX TO EXHIBITS TO FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 1, 1995 Exhibit Number Description Page - ------ ---------------------------------------- ------- 10.17 Consulting agreement between GENICOM Corporation E2-E6 and W. Allen Surber, dated October 11, 1994 10.18 Consulting agreement between GENICOM Corporation E7-E12 and Edward E. Lucente, dated December 6, 1994 11 Statement regarding computation of per share E13 earnings 13 Annual Report to Stockholders of GENICOM E14-E35 Corporation for fiscal year ended January 1, 1995. 22 Subsidiaries of the Registrant E36 24 Consent of Independent Accountants E37 27 Financial Data Schedule Filed only with EDGAR version
E - 1 EX-10.17 2 SURBER_CONTRACT Consulting Agreement Between GENICOM Corporation and W. Allen Surber This agreement, by and between the GENICOM Corporation, a Delaware Corporation (hereinafter called the Company) and W. Allen Surber (hereinafter called Consultant). WITNESSETH THAT: IN CONSIDERATION of the mutual promises hereinafter set forth, the Company and Consultant do hereby agree as follows: 1. This agreement pertains to consulting services as set forth in Attachment A and advice to be furnished to the Company at its request from time to time by the Consultant during the period commencing October 17, 1994 and ending April 14, 1995 inclusive. The amount paid for said services under this agreement exclusive of travel and living expenses and computer service expenses shall not exceed the sum of seventy- five thousand and 00/100 dollars ($75,400). Assignment of this agreement or of any interest therein or any payment due or to become due hereunder, without prior written consent of the Company shall be void. 2. Consultant will participate, as requested by the Company, as a consultant and advisor in the fields and technologies pertaining to relays as set forth in Attachment A as amended from time to time. Prior approval of hours to be worked/travel and living expenses must be received from the President/CEO of GENICOM Corporation or his designee. 3. Within the maximum sum stated in paragraph (1) above and with prior approval as set forth in paragraphs (2) and (9), the Company will reimburse Consultant for services rendered at the rate of seventy-two dollars and 12/100 ($72.12) per hour worked hereunder. The first 26 weeks of this agreement (October 17, 1994, running through April 14, 1995) will be guaranteed for payment unless Consultant accepts other employment during this period. Should Consultant accept other employment during this period, this agreement becomes null and void. The Company will, in addition, reimburse the Consultant for reasonable travel and living expenses incurred while traveling at the request of the Company in the performance of tasks under this agreement. Statements in duplicate will be submitted by the Consultant at the first of each month itemizing hours worked each month with documentation of travel and living expenses. 4. The work contemplated under this agreement requires that Consultant have access to information which is proprietary and/or confidential to the Company. Consultant agrees no to publish or otherwise disclose to persons outside the Company, without specific permission from the Company, any Company information acquired by Consultant as a result of participation in studies or work under this agreement, not to use said information in any ways which might be injurious to the interests of the Company. 5. Consultant agrees to promptly disclose to the Company any information, ideas, or inventions made or conceived by Consultant which may result from or be suggested by work performed by Consultant under this agreement, and to assign to the Company all rights pertaining to such information, ideas, or inventions. Knowledge or information of any kind disclosed by Consultant to the Company shall be deemed to have been disclosed without obligation on the part of the Company to hold the same in confidence, and the Company shall have the full right to use and disclose such knowledge and information without compensation to Consultant beyond that specifically provided by this agreement. 6. Consultant will furnish, on request, written reports of the work performed by Consultant under this agreement, including findings, conclusions, recommendations, and supporting data and analysis, and any such reports shall become the sole property of the Company. 7. Consultant is an independent contractor under this contract. Consultant is not an employee of the Company and will not be entitled to participate in, or receive any benefits, privileges, or rights given or extended by the Company to its employees including without limitation, Company employee insurance, pension, savings plans, etc. 8. This agreement may be terminated by either party by written notice provided, however, the obligations of Consultant under paragraph 4 and 5 herein shall survive any termination of this agreement. In the event of such termination, Consultant shall be paid pursuant to the provisions of paragraph (3) above for services rendered and costs incurred up to the date of such termination shall be accepted by Consultant in full satisfaction of all claims and demands against the Company based upon or arising out of the performance of this agreement. However, in the event termination is made by the Company prior tot he expiration of the "guaranteed for payment" period specified in paragraph (3), payment for the remaining unexpired portion of said "guaranteed for payment" period will be paid to the Consultant in lump sum fashion by the Company. 9. The President/CEO of GENICOM Corporation, shall represent the Company in the administering of this agreement and must approve all requests for Consultant's payment pursuant to paragraph (3) of the agreement. The Company may, by written notice, appoint another Company representative for the above purposes. 10. This agreement is the sole agreement between Consultant and the Company with respect to consulting services to be performed during the term of this agreement and it supersedes all prior arrangements and understandings with respect thereto. No change, modification, alteration or addition to any provisions hereof shall be binding unless in writing and signed by both Consultant and Chief Financial Officer of the Company. 11. This agreement shall be construed, interpreted, and applied in accordance with the law of the Commonwealth of Virginia. P.T. Winn 10/10/94 --------------------------------------- -------- P.T. Winn, President/Chief Executive Officer Date W. Allen Surber 10/11/94 --------------------------------------- -------- W. Allen Surber, Consultant Date Approvals: C.B. Meyer 10/14/94 --------------------------------------- -------- C.B. Meyer, Vice President, Human Resources Date J.A. Jones 10/17/94 --------------------------------------- -------- J.A. Jones, Corporate Controller Date Attachment A Consulting Agreement Between GENICOM Corporation and W. Allen Surber A brief description of work assignment: Provide consultant services on non-impact printer technology and printer industry matters and issues under direction of the President/CEO of GENICOM Corporation or his designee. EX-10.18 3 LUCENTE_CONTRACT Consulting Agreement Between GENICOM Corporation and Edward Lucente This agreement, by and between the GENICOM Corporation, a Delaware Corporation (hereinafter called the Company) and Edward Lucente (hereinafter called Consultant). WITNESSETH THAT: IN CONSIDERATION of the mutual promises hereinafter set forth, the Company and Consultant do hereby agree as follows: 1. This agreement pertains to consulting services as set forth in Attachment A and advice to be furnished to the Company at request from time to time by the Consultant during the period commencing November, 1994 and ending March 31, 1995 inclusive. The amount paid for said services under this agreement exclusive of travel and living expenses and computer service expenses shall not exceed the sum of One hundred thousand and 00/100 dollars ($100,000). Assignment of this agreement or of any interest therein or any payment due or to become due hereunder, without prior written consent of the Company shall be void. 2. Consultant will participate, as requested by the Company, as a consultant and advisor in Marketing and Sales as set forth in Attachment A as amended from time to time. Prior approval of hours to be worked must be received from Paul T. Winn, President & CEO. 3. Within the maximum sum stated in paragraph (1) above, the Company will reimburse Consultant for services rendered at the rate of two thousand dollars and 00/100 ($2,000) per day worked hereunder. The Company will, in addition, reimburse the Consultant for reasonable travel and living expenses incurred while traveling at the request of the Company in the performance of tasks under this agreement. Statements in duplicate will be submitted by the Consultant at the first of each month itemizing hours worked each month with documentation of travel and living expenses. No minimum number of days are guaranteed by the Company, and no portal expense is involved. 4. The work contemplated under this agreement requires that Consultant have access to information which is proprietary and/or confidential to the Company. Consultant agrees no to publish or otherwise disclose to persons outside the Company, without specific permission from the Company, any Company information acquired by Consultant as a result of participation in studies or work under this agreement, not to use said information in any ways which might be injurious to the interests of the Company. 5. Consultant agrees to promptly disclose to the Company any information, ideas, or inventions made or conceived by Consultant which may result from or be suggested by work performed by Consultant under this agreement, and to assign to the Company all rights pertaining to such information, ideas, or inventions. Knowledge or information of any kind disclosed by Consultant to the Company shall be deemed to have been disclosed without obligation on the part of the Company to hold the same in confidence, and the Company shall have the full right to use and disclose such knowledge and information without compensation to Consultant beyond that specifically provided by this agreement. 6. Consultant will furnish, on request, written reports of the work performed by Consultant under this agreement, including findings, conclusions, recommendations, and supporting data and analysis, and any such reports shall become the sole property of the Company. 7. Consultant is an independent contractor under this contract. Consultant is not an employee of the Company and will not be entitled to participate in, or receive any benefits, privileges, or rights given or extended by the Company to its employees including without limitation, Company employee insurance, pension, savings plans, etc. 8. This agreement may be terminated by either party by written notice provided, however, the obligations of Consultant under paragraph 4 and 5 herein shall survive any termination of this agreement. In the event of such termination, Consultant shall be paid pursuant to the provisions of paragraph (3) above for services rendered and costs incurred up to the date of such termination shall be accepted by Consultant in full satisfaction of all claims and demands against the Company based upon or arising out of the performance of this agreement. 9. Paul T. Winn, President & CEO, shall represent the Company in the administering of this agreement and must approve all requests for Consultant's payment pursuant to paragraph (3) of the agreement. The Company may be written notice appoint another Company representative for the above purposes. 10. This agreement is the sole agreement between Consultant and the Company with respect to consulting services to be performed during the term of this agreement and it supersedes all prior arrangements and understandings with respect thereto. No change, modification, alteration or addition to any provisions hereof shall be binding unless in writing and signed by both Consultant and Chief Financial Officer of the Company. 11. This agreement shall be construed, interpreted, and applied in accordance with the law of the State of Virginia. GENICOM Corporation By: Date P.T. Winn 12/6/94 _______________________________________ ________ P.T. Winn, President & Chief Executive Date Officer Edward Luncente 2/21/95 _______________________________________ ________ Edward Lucente, Consultant Date Approvals: C.B. Meyer 12/6/94 _______________________________________ ________ C.B. Meyer, Vice President, Human Resources Date J.A. Jones, Corporate Controller Date Attachment A Consulting Agreement Between GENICOM Corporation and Edward Lucente A brief description of work assignment: See attached description. A brief description of work assignment: Assessments and recommendations for restructuring of GENICOM's worldwide marketing and sales function to increase overall productivity. As we conclude the Americas, progress to EMEA and then to the Asia Pacific group. Assess and recommend direction on three key issues; are there business/customers benefits to (1) integrating all business segment marketing and sales functions in the Americas (printers, supplies, service, parts), (2) having one worldwide marketing and sales organization and (3) multi-vendor service sufficiently different to warrant a separate marketing and sales organization. Provide interim operational direction to all of GENICOM's marketing and sales activities until a Vice President of the Americas is named and we conclude on an International structure. After our agreement, implement structural changes resulting from the above. EX-11 4 EPS_CALCULATION GENICOM Corporation and Subsidiaries STATEMENT REGARDING THE COMPANY'S COMPUTATION OF EARNINGS PER SHARE
Twelve Months Ended ----------------- January 1, January 2, 1995 1994 --------- --------- Shares used in this computation: Weighted average common shares outstanding 10,630 10,621 Shares applicable to stock options, net of shares assumed to be purchased from proceeds at average market 715 0 --------- --------- Total shares for earnings per common share and common share equivalents (primary) 11,345 10,621 Shares applicable to stock options in addition to those used in primary computation due to the use of period-end market price when higher than average 71 0 --------- --------- Total fully diluted shares 11,416 10,621 ========= =========
E-13 EX-13 5 EXHIBIT 13 GENICOM CORPORATION AND SUBSIDIARIES ELEVEN YEAR FINANCIAL HISTORY (Unaudited) HISTORY
Fiscal year, <1> 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 (In thousands, except per share and other data) Income Statement Data: Revenues $233,797 $221,865 $222,692 $217,021 $255,298 $256,873 $291,429 $302,151 $157,463 $126,456 $136,661 Operating costs and 224,629 219,220 214,176 224,363 240,844 271,438 279,455 271,108 138,455 119,042 117,884 expenses <2> Operating income (loss) 9,168 2,645 8,516 (7,342) 14,454 (14,565) 11,974 31,043 19,008 7,414 18,777 Interest expense, net 7,458 7,559 7,742 9,122 12,497 13,814 12,930 11,866 2,997 4,245 6,900 Other income <3> 1,908 1,741 Income (loss) before income taxes, extra- ordinary gain and cumulative effect of accounting change 3,618 (3,173) 774 (16,464) 1,957 (28,379) (956) 19,177 16,011 3,169 11,877 Income tax expense (benefit) 1,048 56 450 275 857 (4,119) (1,960) 8,640 7,403 1,364 5,787 Income (loss) before extraordinary gain and cumulative effect of accounting change 2,570 (3,229) 324 (16,739) 1,100 (24,260) 1,004 10,537 8,608 1,805 6,090 Extraordinary gain <4> 1,273 3,691 5,528 Cumulative effect on prior years of change in accounting principles <5> 4,300 2,018 Net income (loss) $ 2,570 $(3,229) $ 1,597 $(13,048) $6,628 $(24,260) $ 5,304 $12,555 $ 8,608 $1,805 $6,090 Earnings (loss) per share: Income (loss) before extraordinary gain and cumulative effect of accounting change $ 0.23 $ (0.30) $ 0.03 $ (1.58) $ 0.11 $ (2.27) $ 0.09 $ 0.92 $ 0.83 $ 0.20 $ 0.89 Extraordinary gain 0.12 0.35 0.52 Cumulative effect on prior years of change in accounting 0.37 0.17 principles Net income (loss) $ 0.23 $ (0.30) $ 0.15 $ (1.23) $ 0.63 $ (2.27) $ 0.46 $ 1.09 $ 0.83 $ 0.20 $ 0.89 Weighted average shares 11,416 10,621 10,833 10,592 10,811 10,710 11,582 11,555 10,414 9,246 6,862 Balance Sheet Data: Working capital $40,780 $33,642 $54,915 $47,193 $77,965 $78,284 $104,880 $105,861 $39,801 $29,981 $25,158 Total assets 127,267 141,159 146,806 137,299 167,142 190,395 223,909 228,528 97,790 79,974 77,927 Total debt obligations 47,563 69,020 69,311 64,027 85,723 112,004 108,115 108,998 21,021 41,034 38,000 Stockholders' equity 28,083 24,575 28,524 27,804 41,528 34,487 61,565 58,510 45,664 18,735 15,135 Other Data: Employees 2,382 2,147 2,488 2,512 2,896 3,259 3,692 3,587 2,507 2,135 2,194 Price range per common share: <6> Low $1 $1 1/8 $ 7/8 $ 7/8 $ 7/8 $ 7/8 $ 4 1/4 $ 5 3/4 $ 6 1/8 High 3 1/4 3 1/2 2 2 3/4 3 5 10 7/8 16 1/4 13
(1) The Company's fiscal year ends on the Sunday nearest December 31. Accordingly, the Company is reporting for 52-week periods for all years presented, except for fiscal years 1992 and 1987 which are 53- week periods. (2) Includes restructuring costs of $1.0 million, $15.0 million, $14.1 million and $6.0 million in 1993, 1991, 1989 and 1988, respectively. (3) The Company recognized gains of $0.9 million and $1.7 million in 1994 and 1993, respectively, from the sale of its investment in a Belgian printer development and manufacturing company. The Company also recognized a gain of $1.0 million on the early extinguishment of $9.2 million principal amount of its Senior Subordinated Notes in 1994. (4) The Company recognized extraordinary gains of $1.3 million, $3.7 million and $5.5 million, net of taxes of $0.1 million, $0.5 million and $0.6 million, on the early extinguishment of $4.0 million, $13.3 million and $13.0 million principal amount of its Senior Subordinated Notes in 1992, 1991 and 1990, respectively. (5) Effective as of the beginning of 1988, the Company adopted Statement of Financial Accounting Standards No. 96 "Accounting for Income Taxes". Effective as of the beginning of 1987, the Company changed its method of capitalizing certain costs in the valuation of substantially all inventories. (6) The Company began trading on the over-the-counter market on June 26, 1986, the date of its initial public offering. GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
January 1, January 2, January 3, Year Ended, 1995 1994 1993 (In thousands, except per share data) Revenues, net: Products $ 166,518 $ 176,432 $ 177,690 Services 67,279 45,433 45,002 233,797 221,865 222,692 Operating costs and expenses: Cost of revenues: Products 120,455 129,274 125,150 Services 53,439 36,537 34,381 Selling, general and administration 43,015 43,584 44,085 Engineering, research and product development 7,720 9,825 10,560 224,629 219,220 214,176 Operating income 9,168 2,645 8,516 Interest expense, net 7,458 7,559 7,742 Other income 1,908 1,741 Income (loss) before income taxes and extraordinary gain 3,618 (3,173) 774 Income tax expense 1,048 56 450 Income (loss) before extraordinary gain 2,570 (3,229) 324 Extraordinary gain on early extinguishment 1,273 of debt (net of taxes of $141) Net income (loss) $ 2,570 $ (3,229) $ 1,597 Earnings (loss) per common share and common share equivalent (primary and fully diluted): Income (loss) before extraordinary gain $ 0.23 $ (0.30) $ 0.03 Extraordinary gain, net of taxes 0.12 Net income (loss) $ 0.23 $ (0.30) $ 0.15 Weighted average number of common shares and common share equivalents outstanding: Primary 11,345 10,621 10,605 Fully diluted 11,416 10,621 10,833
GENICOM Corporation and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) Results of Operations Net Revenue In 1994, GENICOM Corporation ("GENICOM" or the "Company") reported revenue growth of 5.4%. This growth is primarily attributable to the favorable performance of the strategic businesses of Enterprising Service Solutions ("ESS") and Supplies, which were partially offset by the decline in the Impact Printing Solutions business. Printer revenues decreased $18.7 million or 18.2% in 1994 as compared with 1993. This decrease is attributable to the decline in the Impact Printing Solutions business. In 1994, revenues from the Company's shuttle matrix line impact printers, mature serial matrix and band line impact printers and high-speed serial matrix impact printers decreased $5.8 million, $5.3 million and $4.0 million, respectively, as compared with 1993. Management expects printer revenues to increase in 1995 due to, among others, new introductions of laser printer products and a full year of volume shipments of its new shuttle matrix line impact printers. Printer revenues increased $2.4 million or 2.3% in 1993 as compared with 1992. This increase is attributable to growth in the Company's Laser Printing Solutions business partially offset by declines in mature impact printer products and reduced sales to OEM customers. In 1993, revenues from the Company's laser printer products and high-speed serial matrix impact printers increased $10.5 million and $5.6 million, respectively, as compared with 1992. Partially offsetting the 1993 revenue increases were revenue declines in shuttle matrix line impact printers and mature serial matrix and band line impact printers of $7.5 million and $4.7 million, respectively. [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed printer revenues (in millions) for the following years: 1992 - $100, 1993 - - $103 and 1994 - $84.] ESS revenues increased $22.5 million or 51.0% in 1994 as compared with 1993 and $0.4 million in 1993 as compared with 1992. The Computervision Corporation, Canon U.S.A. and Motorola Computer Group depot and field service contracts comprised most of the 1994 revenue growth. Revenues increased in 1993 due to the expansion of multivendor service activities. Management anticipates that 1995 ESS revenue will be above fiscal 1994 levels as a result of a full year's effect of the revenue associated with the new contract business referred to above and the Company's anticipated expansion of its multivendor field and depot operations. [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed supplies revenues (in millions) for the following years: 1992 - $39, 1993 - $43 and $50.] [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed ESS revenues (in millions) for the following years: 1992 - $45, 1993 - $45 and 1994 - $67.] Supplies revenues increased $6.6 million or 15.3% in 1994 as compared with 1993 and increased $4.4 million or 10.2% in 1993 as compared with 1992. The revenue growth in the Supplies business is attributable to increased market share achieved by increasing the number of product offerings, including laser printer supplies, and aggressive marketing in established markets. Management anticipates that 1995 supplies revenues will approximate those of fiscal 1994. Spares revenues increased $2.0 million or 12.8% in 1994 as compared with 1993 and decreased $5.7 million or 36.6% in 1993 as compared with 1992. Spares revenues rebounded from the 1993 decline partially due to the success of the Company's printhead and print module marketing programs. Management anticipates that 1995 spares revenues will approximate those of fiscal 1994. Relay revenues decreased $0.1 million in 1994 as compared with 1993 and decreased $2.3 million or 15.2% in 1993 as compared with 1992. The 1993 revenue decline was a result of soft market conditions in the aerospace and defense industries. Management believes that 1995 relay revenues will approximate those of fiscal 1994. [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed relays revenues (in millions) for the following years: 1992 - $17, 1993 - $15 and 1994 - $15.] Order Backlog Order backlog increased $14.8 million or 43.2% in 1994 as compared with 1993 and decreased $5.9 million or 14.7% in 1993 as compared with 1992. The 1994 increase in order backlog is primarily due to the higher backlog in the ESS business. The 1993 decline in order backlog was due to a decline in the backlog from the Company's largest laser printer customer and lower orders from the Company's original equipment manufacturer customers who generally place longer lead time orders. The Company's backlog as of any particular date should not be the sole measurement used in determining sales for any future period. [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed order backlog (in millions) for the following years: 1992 - $40, 1993 - $34 and 1994 - $49.] Gross Profit Margin Gross margin, as a percentage of revenue, increased slightly in 1994 as compared with 1993 as a result of a larger proportion of consolidated revenues being associated with higher margin products such as supplies and spares which was largely offset by lower margins in the Impact Printing Solutions businesses, start-up costs incurred in the ESS business and unfavorable production costs in the Relay business. Gross margin, as a percentage of revenue, had decreased in 1993 as compared with 1992 due to price competition and higher costs in the Laser Printing Solutions business and lower revenues in the Company's higher margin spares and relay products. Two other events caused lower gross margins in 1993: the adoption of Statement of Financial Accounting Standards ("SFAS") No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the first quarter of 1993; and unfavorable foreign currency movements. Meanwhile, revenue growth achieved in the Company's higher margin Supplies business favorably impacted the Company's 1993 gross margin. Operating Expense Operating expenses in 1994 as compared with 1993 decreased overall and as a percentage of revenue, due to the favorable impact of the Company's January 1994 cost reduction program that included personnel, salary and benefit reductions for the Company's worldwide operations, partially offset by increased costs associated with the growth in ESS operations. Management estimates that the cost reduction program lowered expenses by approximately $1.7 million. In addition, engineering, research and product development expenses decreased significantly due to the completion of the development of a new high speed shuttle matrix line impact printer and lower software development costs. Operating expenses in 1993 as compared with 1992 also decreased, both in amount and as a percentage of revenue. This decrease occurred despite the increase in operating expenses due to the adoption of SFAS No. 106 and incurring restructuring costs associated with the reorganization of sales and marketing, development and administrative operations including the formation of an application solutions' function. Favorably impacting operating expenses was recognition of an amount due from the General Electric Company ("G.E.") relating to prior costs for environmental matters at the Company's Waynesboro, Virginia facility. Interest Expense The Company's interest expense decreased $0.7 million or 8.7% in 1994 as compared with 1993, however, the 1993 expense was favorably impacted by a first quarter interest payment receipt from the Internal Revenue Service of $0.6 million related to the settlement of prior year tax matters. The 1994 decrease resulted from the impact of the Company's repurchase of its 12.5% Senior Subordinated Notes ("Notes") in the second and fourth quarter of 1994 and the decrease in borrowings from its senior credit facility, partially offset by the interest rate increases on the same senior credit facility. The Company's interest expense increased $0.4 million or 4.5% in 1993 as compared with 1992, however, the 1993 expense was favorably impacted by the interest payment from the Internal Revenue Service of $0.6 million mentioned earlier. The increase in interest expense relates primarily to the Company's working capital investment requirements. [Graphic material near the above paragraph has been omitted from this electronic filing. This bar chart image displayed net interest expense (in millions) for the following years: 1992 - $8, 1993 - $8 and 1994 - $7.] Other Income During 1994, the Company recognized a pre-tax gain of $1.0 million from the repurchase of the Notes. During the 1994 first quarter, the Company recognized a pre-tax gain of $0.9 million on the sale of its remaining investment in Xeikon N.V., ("Xeikon") a Belgian printer development and manufacturing company. In the fourth quarter of 1993, the Company recognized a pre-tax gain of $1.7 million from the sale of approximately 65.0% of its investment in Xeikon. Income Tax The Company's effective income tax rate for fiscal year 1994 was 29.0% compared with (1.8)% and 58.1% in fiscal years 1993 and 1992, respectively. These rates are significantly affected by foreign income taxes and the utilization of net operating losses. On January 4, 1993, the Company adopted SFAS No. 109 "Accounting for Income Taxes". The Company had previously accounted for income taxes under the liability method in accordance with SFAS No. 96. The adoption of SFAS No. 109 did not have a material effect on the Company's financial condition or results of operations. Extraordinary Gain The extraordinary gains resulted from the financial effect of the Company's open market purchases of $4.0 million in 1992 principal amounts of its Notes at a discount from par value. The extraordinary gains were net of income taxes of $0.1 million and the write-off of unamortized debt issuance costs. GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
January 1, January 2, 1995 1994 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 673 $ 1,797 Accounts receivable, less allowance for doubtful accounts of $1,479 and $1,480 37,846 35,932 Other receivables 2,711 7,202 Inventories 43,368 53,831 Prepaid expenses and other assets 2,329 1,594 Total current assets 86,927 100,356 Property, plant and equipment 26,215 24,869 Goodwill 9,293 10,180 Other assets, principally intangibles 4,832 5,754 $ 127,267 $ 141,159 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 371 $ 23,263 Accounts payable and accrued expenses 37,540 36,504 Deferred income 8,236 6,947 Total current liabilities 46,147 66,714 Long-term debt, less current portion 47,192 45,757 Other non-current liabilities 5,845 4,113 Total liabilities 99,184 116,584 Stockholders' equity: Common stock, $0.01 par value; 15,000,000 106 106 shares authorized, 10,638,299 and 10,621,699 shares issued Additional paid-in capital 25,760 25,744 Retained earnings 4,351 1,781 Foreign currency translation adjustment (1,435) (1,957) Pension liability adjustment (699) (1,099) Total stockholders' equity 28,083 24,575 $ 127,267 $ 141,159
GENICOM Corporation and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) Liquidity and Capital Resources The Company's working capital increased from $33.6 million in 1993 to $40.8 million in 1994, an increase of $7.1 million or 21.2%. The Company's current ratio was 1.9 to 1 at the end of fiscal year 1994 compared to 1.5 to 1 at the end of fiscal year 1993. These favorable trends are primarily attributable to the decrease in debt classified as current under the senior credit facility, partially offset by the decrease in the Company's inventory. Cash and cash equivalents decreased $1.1 million since January 2, 1994. Net cash generated by operations during 1994 totaled $28.6 million. The major sources of cash are profitable operations, inventory management programs, lower spending for restructuring programs and favorable payment terms associated with the Company's growing ESS business. [A graphic image near the above paragraph has been omitted from this electronic filing. This bar chart image displayed inventories (in millions) for the following years: 1992 - $56, 1993 - $54 and 1994 - $43] Due to the needs of its growing ESS business, the Company has increased the cash used in investing activities to acquire the necessary field support spares and equipment. The Company used cash flow to reduce borrowings under its senior credit facility and to purchase $9.2 million of its Notes in the open market at favorable terms, thus realizing a gain of $1.0 million. The Company does not have any material commitments of funds for capital expenditures other than to support the current level of operations, except for the acquisitions discussed below (See "Other Matters"). The Company intends to fund the purchase price of such acquisitions through its cash flows from operations, credit facilities and the potential issuance of common stock. In the first quarter of 1994, the Company retired $9.0 million principal amount of its previously purchased Notes in fulfillment of its annual sinking fund requirement. As of January 1, 1995, the Company had $12.4 million of the Notes in treasury, $9.0 million of which will be used to satisfy the 1995 sinking fund requirement and $3.4 million which will be applied to the $9.0 million needed for the 1996 sinking fund requirement. In addition to the above mentioned sinking fund requirements, on February 15, 1997, $31.0 million of the Notes will mature. While the Company expects that it will be able to satisfy the balance of the 1996 sinking fund and the 1997 maturity, there is no assurance that the Company will have the resources available to do so. [A graphic image near the above paragraph has been omitted from this electronic filing. This bar chart image displayed debt obligations (in millions) for the following years: 1992 - $69, 1993 - $69 and 1994 - $48.] As of January 1, 1995, the Company had $10.9 million outstanding and $13.4 million available for borrowing under its senior credit facility. On June 9, 1994, the Company and its senior creditor amended the Company's senior credit facility by extending its term to fiscal 1997, changing the rate of interest to prime plus 3.0% and providing for early termination of the credit facility by the Company under certain circumstances. Other Matters On February 16, 1995, the Company completed its acquisition of substantially all of Printer Systems Corporation's ("PSC") outstanding common and preferred shares for consideration aggregating to potentially $4.8 million. PSC had fiscal year 1994 revenues approximating $10.0 million. The acquisition of PSC will expand the Company's Laser Printing Solutions and Enterprising Service Solutions businesses. On March 1, 1995, the Company completed its acquisition of substantially all of the assets and liabilities of Harris Adacom Network Services, Inc. ("HANS"), including its Canadian subsidiary, Harris Adacom Inc., for cash and notes totaling $7.3 million. In 1994, revenues from the acquired operations totaled $36.1 million. The acquisition of HANS will significantly expand the Company's Enterprising Service Solutions business and will provide an entry into the systems integration business and the new markets of network diagnostic and monitoring services. On November 17, 1994, the Company announced that it was in negotiations with an undisclosed third party to acquire their desktop printer business with revenue under $100 million. The proposed acquisition is subject to negotiation of definitive agreements by the various parties, government and shareholder approvals, and other customary and appropriate steps. At this time there is no assurance that any agreement will be reached. Management believes that a material decline in sales volume or the Company's inability to effectively execute their integration programs for the newly acquired strategic businesses could have a material adverse impact on the financial condition, results of operations, or liquidity of the Company. As described in further detail in the Company's 1994 Annual Report, Notes to Consolidated Financial Statements, the Company is required to adopt SFAS No. 107 "Disclosures about Fair Value of Financial Instruments", SFAS No. 114 "Accounting by Creditors for Impairment of a Loan", SFAS No. 118 "Amendment to Accounting for Certain Investments in Debt and Equity Securities", and SFAS No. 119 "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" during fiscal year 1995. Management believes such standards will not have a material adverse impact on the financial condition, results of operations, or liquidity of the Company. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended, January 1, January 2, January 3, (In thousands) 1995 1994 1993 Cash flows from operating activities: Net income (loss) $ 2,570 $ (3,229) $ 1,597 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation 9,374 6,703 6,380 Amortization 3,149 2,400 2,100 Effect of gain on early extinguishment of notes (1,009) Effect of investment gain (901) (1,741) Extraordinary gain (1,414) Effect of restructuring accrual 0 (3,380) (3,767) Effect of environmental recovery from G.E. 0 (862) Changes in assets and liabilities: Accounts receivable 1,031 2,099 (5,892) Inventories 10,882 1,710 (9,401) Accounts payable and accrued expenses 2,521 1,733 8,503 Other 938 (190) 3,748 Net cash provided by operating activities 28,555 5,243 1,854 Cash flows from investing activities: Additions to property, plant and equipment (11,067) (5,724) (5,241) Proceeds from sale of investment 3,436 Other investing activities (581) (1,456) (2,124) Net cash used in investing activities (8,212) (7,180) (7,365) Cash flows from financing activities: Borrowings from long-term debt 21,537 26,818 30,534 Payments on long-term debt (33,985) (26,697) (21,218) Purchases of senior subordinated notes (8,123) (2,565) Net cash (used in) provided by financing activities (20,571) 121 6,751 Effect of exchange rate changes on cash and cash (896) 612 811 equivalents Net (decrease) increase in cash and cash (1,124) (1,204) 2,051 equivalents Cash and cash equivalents at beginning of year 1,797 3,001 950 Cash and cash equivalents at end of year $ 673 $ 1,797 $ 3,001 Supplemental data: Cash paid (received) during the year for: Income taxes $ 28 $ (501) $ (1,181) Interest 7,491 7,953 7,758
GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the years ended January 1, 1995, January 2, 1994 and January 3, 1993 (In thousands)
Foreign Common Stock Additional Currency Pension ---------------- Paid-in Retained Translation Liability Shares Amount Capital Earnings Adjustment Adjustment Balance as of December 29, 10,605 $ 106 $ 25,730 $ 3,413 $ (631) $ (814) 1991 Exercise of stock options Net income 1,597 Cumulative translation (1,164) adjustment Pension liability adjustment 287 Balance as of January 3, 1993 10,605 106 25,730 5,010 (1,795) (527) Exercise of stock options 17 14 Net loss (3,229) Cumulative translation (162) adjustment Pension liability adjustment (572) Balance as of January 2, 1994 10,622 106 25,744 1,781 (1,957) (1,099) Exercise of stock options 16 16 Net income 2,570 Cumulative translation 522 adjustment Pension liability adjustment 400 Balance as of January 1, 1995 10,638 $ 106 $ 25,760 $ 4,351 $ (1,435) $ (699)
GENICOM Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of GENICOM Corporation (the "Company") and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the 1993 and 1992 financial statements in order to conform to the 1994 presentation. Fiscal Year The Company's fiscal year ends on the Sunday nearest December 31. Accordingly, the Company is reporting for the 52-week periods ended January 1, 1995 and January 2, 1994, and the 53-week period ended January 3, 1993. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Inventories Inventories are stated at the lower of cost, determined on the first-in first-out method, or market. Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation is calculated using the straight-line method for financial reporting purposes based on estimated lives at acquisition date (generally 10 to 25 years for buildings and 18 months to 10 years for machinery and equipment) and accelerated methods for income tax purposes. Significant improvements and the cost of tooling are capitalized, while repairs and maintenance costs are charged to operations. Goodwill and Intangibles Goodwill includes the excess of acquisition costs over the fair market value of net assets of acquired businesses and is being amortized on a straight-line basis over 5 to 20 years. The Company assesses at each balance sheet date whether there has been a permanent impairment in the value of goodwill. This is accomplished by determining whether projected undiscounted future cash flows from operations exceed the net book value of goodwill as of such balance sheet date. Other intangible assets, including patents, copyrights, trademarks, licenses and organization and financing costs, are amortized on a straight- line basis over periods ranging from 3 to 15 years. The aggregate amount of accumulated amortization for goodwill and intangibles was $12.9 million and $10.7 million at January 1, 1995 and January 2, 1994, respectively. Research and Development Costs and Capitalized Software Costs incurred in basic research and development are expensed as incurred. Certain costs relating to software and product development are capitalized and amortized over the estimated economic life of the product. The Company capitalized software costs of $0.6 million and $1.5 million in 1994 and 1993, respectively. The related amortization expenses were $1.0 million and $0.4 million in 1994 and 1993, respectively. As of January 1, 1995 and January 2, 1994, capitalized software, net of amortization, was $1.5 million and $1.9 million, respectively. Income Taxes The Company accounts for income taxes under the liability method in accordance with SFAS No. 109 "Accounting for Income Taxes". Certain expenses are recognized in different periods for financial reporting and Federal income tax purposes. Research and development credits are recognized as a reduction of income tax expense in the year they are recognized for Federal tax purposes. The Company does not provide deferred taxes on the undistributed earnings of its foreign subsidiaries as such earnings are intended to be permanently reinvested in those operations. Foreign Operations The consolidated balance sheets include foreign assets and liabilities of $55.5 million and $14.7 million as of January 1, 1995, respectively, and $54.8 million and $15.3 million as of January 2, 1994, respectively. The net effects of foreign currency transactions reflected in income were immaterial in fiscal years 1994, 1993 and 1992. Assets and liabilities of most of the Company's foreign operations are translated into U.S. dollars using exchange rates in effect at the balance sheet date and results of operations items are translated using the average exchange rates prevailing throughout the period. The resulting translation adjustments are recorded as a separate component of stockholders' equity. The Company's Mexican subsidiary remeasures its financial statements in U.S. dollars, as this is the currency of the primary economic environment in which the entity operates. Prior to 1993, the Mexican subsidiary was considered to operate in a highly inflationary economy. Accordingly, its translation adjustments, which are not material, are included in results of operations. Off-Balance Sheet Risk and Concentrations of Credit Risk The Company periodically hedges against foreign currency fluctuations through the use of forward exchange contracts. Gains and losses on contracts to hedge foreign currency commitments are deferred and accounted for as part of the commitment transaction except for losses expected to be incurred in future periods which are recorded when identified. The forward exchange contracts which the Company uses as hedges are subject to off-balance sheet market risk. The Company believes that its risk due to non-performance by the other parties to these contracts is remote. The Company had $0.6 million and $4.3 million of forward exchange contracts outstanding as of January 1, 1995 and January 2, 1994, respectively. Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of receivables. The Company extends credit to various customers that are primarily in the computer and computer peripherals industries. These specific industries may be similarly affected by economic factors, however, the Company performs ongoing credit evaluations of its customers and establishes an allowance for doubtful accounts for specific customers that it determines to have significant credit risk. Generally, the Company does not require collateral from its customers and has, historically, not experienced significant credit related losses. Revenue Recognition and Warranty Costs Revenues from the sales of products, which include printers and relays, are recorded when products are shipped to customers. Revenues from services, which include service and rentals, are recognized monthly as earned. Advance billings for customer maintenance contracts are deferred and amortized over the contract life on a straight-line basis. Estimated warranty costs for equipment sales are provided for in the year of sale. Net Income (Loss) Per Share Net income (loss) per common share and common share equivalent is computed by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding during each year. Common share equivalents include the weighted average number of shares issuable upon the assumed exercise of outstanding stock options, assuming the applicable proceeds from such exercise are used to acquire treasury shares. Recent Accounting Pronouncements The Financial Accounting Standards Board issued SFAS No. 107 "Disclosures about Fair Value of Financial Instruments", SFAS No. 114 "Accounting by Creditors for Impairment of a Loan", SFAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure - Amendment of SFAS No. 114" and SFAS No. 119 "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments". Management believes such standards will not have a material adverse impact on the financial condition, results of operations or liquidity of the Company. Note 2: SUPPLEMENTAL BALANCE SHEET INFORMATION Inventories consist of:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Raw materials $ 14,354 $ 13,768 Work in process 6,639 8,524 Finished goods 22,375 31,539 $ 43,368 $ 53,831
Property, plant and equipment consists of:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Land $ 714 $ 713 Buildings 10,406 10,361 Machinery and equipment 77,274 76,954 Construction in progress 361 305 88,755 88,333 Less: accumulated depreciation 62,540 63,464 $ 26,215 $ 24,869
Accounts payable and accrued expenses consist of:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Trade accounts payable $ 18,918 $ 19,554 Accrued liabilities: Accrued compensation and benefits 8,900 9,045 Interest 1,883 2,383 Other 7,839 5,522 $ 37,540 $ 36,504
Note 3: DEBT OBLIGATIONS Long-term debt consists of:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Revolving credit notes and term loans $ 10,897 $ 22,511 Senior subordinated notes 36,532 45,627 Other subordinated notes 134 882 47,563 69,020 Less: current portion 371 23,263 $ 47,192 $ 45,757
The Company has an agreement (the "Loan Agreement") with a lender to provide credit facilities to a maximum borrowing of $35.0 million. The Loan Agreement was amended on June 9, 1994, to extend its term to December 30, 1996. The Company has pledged as collateral generally all assets of the Company. The Loan Agreement provides for financing based on formulas applied to certain adjusted asset balances, such balances being determined at lender's sole discretion, an annual fee of 4.0% of the amount by which average daily borrowings are below $10.0 million, and interest at a posted prime rate plus 3.0% (11.5% as of January 1, 1995). Prior to June 9, 1994 the interest rate was the posted prime rate plus 2.25% (8.25% as of January 2, 1994). Also, the Loan Agreement has provisions for automatic renewal for successive one (1) year terms should certain notice provisions not be exercised by either party. Moreover, upon the termination of the Loan Agreement by either the lender, pursuant to an event of default, or the Company, a termination fee is payable by the Company. The Company classified the loan as current on the January 2, 1994 balance sheet, since the Loan Agreement was due to expire on September 23, 1994. The Company maintains a term loan agreement (the "Term Loan") with the same lender which amortizes monthly and bears the same interest rate. The Term Loan matures on the earlier of the maturity date of the Loan Agreement or September 1, 1997. The Company's international subsidiaries maintain various credit facilities for their local operations. Borrowings under such credit facilities bear interest at prevailing or negotiated rates. The Company issued senior subordinated notes (the "Notes") on February 13, 1987, with an aggregate principal amount of $76.0 million. The Notes, which bear interest at 12.5% payable semiannually, are redeemable at the option of the Company, in whole or in part, at any time on or after February 15, 1992. Sinking fund payments to retire $9.0 million annually began in 1992, with the Notes maturing on February 15, 1997. The Notes are subordinated to all senior indebtedness. In 1994 and 1992, the Company used cash flow from operations and borrowings under the Loan Agreement to purchase $9.2 million and $4.0 million, respectively, principal amount of its Notes prior to their scheduled maturity. Such purchases were at market prices below face value and, as a result, the Company recognized gains of $0.7 million and $1.3 million, net of income taxes and the write-off of related unamortized discount and debt issuance costs. Notes purchased by the Company have been applied to the Notes' sinking fund requirements and $12.4 million of the Notes remain in treasury. This amount will be applied toward the Notes' sinking fund requirements for 1995 and a portion of the 1996 requirement. The Loan Agreement and the Notes contain certain restrictive covenants which include, among other things, required minimum net worth of $22.8 million, restrictions on additional borrowing and the sale or disposition of certain assets and limitations on the payment of dividends. Under the most restrictive covenants, retained earnings are not available for payment of dividends in 1995. Aggregate maturities and sinking fund requirements for long- term debt at January 1, 1995, after giving consideration to the Notes held in treasury, mature as follows: $0.4 million in 1995, $16.1 million in 1996 and $31.2 million in 1997. Note 4: EMPLOYEE BENEFIT PLANS The Company provides postretirement medical and life insurance benefits to hourly and salaried employees hired before March 22, 1993, who retire after attaining age 60 with at least 5 years of service. Under certain conditions, benefits may be extended to the retirees' spouse and dependents. Salaried employees hired after March 22, 1993, are eligible for postretirement medical and life insurance benefits only upon attainment of Social Security retirement age and completion of 10 years of service and no spouse or dependent coverage is provided. The postretirement medical coverage is contributory, while the life insurance coverage is noncontributory. On January 4, 1993, the Company adopted the provisions of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions", which requires the accrual of the cost of providing postretirement benefits during an employee's active service. The components of net periodic postretirement benefit costs were:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Service cost - benefits attributed to $ 396 $ 493 service during the period Interest cost on accumulated 1,334 1,291 postretirement benefit obligation Amortization of unrecognized transition 878 878 obligation over 20 years Net periodic postretirement benefit cost $ 2,608 $ 2,662
The following table sets forth the combined funded status for the Company's postretirement benefit obligation as of the indicated actuarial valuation dates:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Accumulated postretirement benefit obligation: Retirees $ 9,296 $ 10,515 Active plan participants 8,045 9,128 17,341 19,643 Unrecognized transition 15,805 16,683 obligation Unrecognized net (gain) loss (2,309) 1,130 Accrued postretirement benefit cost $ 3,845 $ 1,830
The Company funds postretirement benefit costs as incurred. For measurement purposes, 11.0% and 12.0% annual rates of increase in the per capita cost of covered health care benefits were assumed for 1995 and 1994, respectively; both rates were assumed to decrease gradually to 6.0% for 2001 and remain at that level thereafter. If the he,alth care cost trend rate were to increase 1.0%, the accumulated postretirement benefit obligation as of January 1, 1995 and January 2, 1994, would have increased by 7.0% and 5.0%, respectively. The effect of this change on the aggregate service and interest costs for 1994 and 1993 would be increases of 7.1% and 4.7%, respectively. The weighted- average discount rates used in determining the accumulated postretirement benefit obligation were 8.0% and 7.0% in 1994 and 1993, respectively. Substantially all domestic non-collective bargaining employees are eligible to participate in the Company's retirement savings plan (the "Savings Plan"), which qualifies under section 401(k) of the Internal Revenue Code. The Company makes certain matching contributions which are allocated to the participants and vest based on the employee's years of service. The Company's expense under the Savings Plan was $0.5 million, $1.2 million and $1.1 million in fiscal years 1994, 1993 and 1992, respectively. The Company's domestic collective bargaining employees are covered by a contributory defined benefit pension plan (the "Pension Plan"). The Pension Plan benefits are based on years of credited service and the participant's compensation. Eligible employees must elect to participate and contribute 3.0% of compensation between $12,000 and $25,650 per calendar year. The Company makes contributions to the Pension Plan sufficient to meet federal funding requirements. Components of periodic pension costs were:
Jan. 1, Jan. 2, Jan. 3, (in thousands) 1995 1994 1993 Service cost $ 445 $ 442 $ 426 Interest cost on projected 731 660 608 benefit obligation Actual return on plan assets 131 (753) (528) Net amortization and deferral (673) 243 92 Net periodic pension expense $ 634 $ 592 $ 598
The following table sets forth the Pension Plan's funded status as of the indicated actuarial valuation dates:
Jan. 1, Jan. 2, (in thousands) 1995 1994 Actuarial present value of benefit obligations: Vested benefits $ 8,621 $ 8,550 Non-vested benefits 555 672 Total accumulated benefit obligations 9,176 9,222 Effect of projected future compensation 734 936 levels Projected benefit obligation 9,910 10,158 Fair value of plan assets 8,097 7,603 Fair value of plan assets less than (1,813) (2,555) projected benefit obligations Unrecognized net liability existing at 318 363 January 1, 1987 Unrecognized net loss from actuarial 1,753 2,116 experience Adjustment to recognize minimum liability (1,337) (1,544) Accrued pension cost $ (1,079) $ (1,620)
The Company's assumptions used in determining the pension cost and pension liability shown above were as follows:
Jan. 1, Jan. 2, Jan. 3, 1995 1994 1993 Discount rate 8.00 7.25 7.75 Rate of compensation 5.00 5.00 5.00 progression Rate of return on plan assets 9.00 9.00 9.00
Pension Plan assets consist primarily of treasury notes, government and corporate bonds, corporate equities and cash equivalent funds. The Company makes contributions to various employee benefit plans for certain of its foreign subsidiaries and the expense for these plans was not material in 1994, 1993 and 1992. On January 3, 1994, the Company adopted the provisions of SFAS No. 112 "Employers' Accounting for Postemployment Benefits" which requires employers to accrue costs of providing postemployment benefits other than pensions. The implementation of SFAS No. 112 did not have a material effect on the Company's financial condition, results of operations or liquidity. Note 5: STOCK OPTIONS Under the Company's stock option plan, 1,913,368 shares of unissued common stock are reserved for issuance pursuant to options outstanding and to be granted. Stock option activity for the respective fiscal periods is as follows:
Number of Option Amount Shares Per Share Total Outstanding, December 29, 1991 917,567 $ 0.15-7.50 $ 1,252,577 Granted 270,000 1.00-1.44 332,188 Exercised Cancelled (52,500) 1.00-1.63 (55,625) Outstanding, January 3, 1993 1,135,067 0.15-7.50 1,529,140 Granted 406,500 1.00-1.50 412,500 Exercised (17,000) 0.15-1.75 (17,975) Cancelled (42,000) 0.15-1.50 (51,500) Outstanding, January 2, 1994 1,482,567 1.00-7.50 1,872,165 Granted 460,000 1.00-2.38 471,688 Exercised (16,600) 1.00 (16,600) Cancelled (166,833) 1.00-7.50 (196,823) Outstanding, January 1, 1995 1,759,134 $ 1.00-7.50 $ 2,130,430 Options exercisable, January 1, 1995 819,934 $ 1.00-7.50 $ 1,090,330 Options available for future grants 154,234
Options granted under the stock option plan are granted at prices not less than 85.0% of the fair market value of the common stock and become exercisable in installments at dates ranging from one to ten years from the date of grant, as determined by the Board of Directors or the Compensation Committee thereof. In 1992 and 1993, the stockholders approved nonstatutory stock option grants of 100,000 and 10,000 shares of common stock, respectively, to certain members of the Company's Board of Directors. The stock options become exercisable at a rate of 33.3% per year beginning one year from grant date. However, the stock options become fully exercisable upon the merger of the Company into another entity or the acquisition of the Company by another entity or the sale or transfer of substantially all assets of the Company to another entity. As of January 1, 1995, none of these stock options had been exercised. Note 6: Income Taxes On January 4, 1993, the Company adopted SFAS No. 109. The Company previously accounted for income taxes under the liability method in accordance with Statement of Financial Accounting Standards No. 96 "Accounting for Income Taxes". The adoption of SFAS No. 109 did not have a material effect on the Company's financial condition or results of operations. The components of income (loss) before income taxes were as follows: (in thousands) Jan. 1, Jan. 2, Jan. 3, 1995 1994 1993 Domestic $ 4,524 $ 1,767 $ 4,943 Foreign (906) (4,940) (4,169) $ 3,618 $ (3,173) $ 774 Income tax expense (benefit) consists of the following:
(in thousands) Jan. 1, Jan. 2, Jan. 3, 1995 1994 1993 Current: Federal $ 164 $ (27) State 568 23 $ 70 Foreign 148 60 283 880 56 353 Deferred: Federal 168 82 Foreign 15 168 97 $ 1,048 $ 56 $ 450 A reconciliation of the U.S. statutory Federal tax rate of 34.0% to the Company's effective tax rate is as follows:
(in thousands) Jan. 1, Jan. 2, Jan. 3, 1995 1994 1993 Tax expense (benefit) at statutory rate $ 1,230 $ (1,079) $ 263 Increase (decrease) related to: State income taxes, net of Federal tax benefit 568 23 70 Foreign income tax 148 60 298 Foreign operating losses generating no current tax benefit 279 1,642 1,462 Domestic operating profit not taxed due to carryfoward losses (1,331) (563) (1,725) Other, net 154 (27) 82 $ 1,048 $ 56 $ 450 29.0% (1.8)% 58.1%
Deferred tax assets and liabilities are recorded based on temporary differences between earnings as reported in the financial statements and earnings for income tax purposes. The major components of the Company's deferred tax assets and liabilities are as follows:
(in thousands) Jan. 1, Jan. 2, 1995 1994 Deferred tax assets: Net operating loss carryforwards $ 12,838 $ 10,958 Inventory valuation 3,475 3,439 Retiree medical and life 1,580 732 Vacation accrual 1,049 1,146 Bad debt reserve 554 603 Gain on tax/book differential 93 6,528 Valuation allowance (16,747) (19,943) Total deferred tax asset $ 2,842 $ 3,463 Deferred tax liabilities: Depreciation 1,481 1,896 Foreign currency translation gain 456 456 Other 905 1,111 Total deferred tax liability $ 2,842 $ 3,463
At January 1, 1995, the Company had U.S. Federal net operating loss carryforwards of $11.8 million, of which $11.3 million expires in 2005 and $0.5 million expires in 2008. The Company also had available research and development tax credit carryforwards in the amount of $0.5 million which expire during the years of 2003 to 2008. The cumulative amount of undistributed earnings of foreign subsidiaries which the Company intends to permanently invest and upon which no deferred U.S. income taxes have been provided is $2.5 million. The Company cannot practically determine the amount of deferred income tax liability that would result had such earnings actually been remitted. The amount of foreign withholding taxes, at current rates, that would have been due on the earnings had they actually been remitted was $0.1 million. Note 7: OTHER INCOME AND RESTRUCTURING COSTS During fiscal 1994, the Company reported gains of $1.0 million from the early extinguishment of $9.2 million of its Notes. During fiscal 1994 and 1993, the Company sold 35.0% and 65.0%, respectively, of its investment in Xeikon N.V., a Belgian printer development and manufacturing company. These transactions added approximately $0.9 million and $1.7 million of pre-tax income to fiscal 1994 and 1993, respectively. During fiscal 1993, the Company incurred costs totaling $1.0 million associated with the reorganization and restructuring of the Company's sales and marketing, development and administrative operations including the formation of an application solutions function. Such costs are reflected in the Company's operating expenses. Note 8: COMMITMENTS AND CONTINGENT LIABILITIES Leasing arrangements: As lessee: The Company leases certain manufacturing and warehousing properties. Rent expense amounted to $6.7 million, $6.3 million, and $6.8 million in 1994, 1993 and 1992, respectively. Minimum future lease commitments for operating leases as of January 1, 1995, are as follows: 1995 - $4.4 million, 1996 - - $2.5 million, 1997 - $1.5 million, 1998 - $0.9 million, 1999 - $0.3 million and $1.8 million thereafter. As lessor: The Company has rental plans for the leasing of printers. Operating lease terms vary, generally from one to sixty months. Rental revenue was $0.7 million, $1.1 million, and $1.4 million for 1994, 1993 and 1992, respectively. On January 1, 1995 and January 2, 1994, the cost of equipment leased was $1.1 million and $1.0 million, respectively, which is included in property, plant and equipment, net of accumulated depreciation of $0.9 million and $0.9 million, respectively. Environmental matters: The Company and the former owner of its Waynesboro, Virginia facility, General Electric Company ("G.E."), have generated and managed hazardous wastes at the facility for many years as a result of their use of certain materials in manufacturing processes. The Company and the United States Environmental Protection Agency ("EPA") have agreed to a corrective action consent order ( the "Order"), which became effective on September 14, 1990. The Order requires the Company to undertake an investigation of solid waste management units at its Waynesboro, Virginia facility and to conduct a study of any necessary corrective measures that may be required. Although the Order is currently being implemented, it is not possible for the Company to reliably estimate the total cost of the investigation and the study required by the Order. If, as a result of the investigation and study, corrective measures are required, the Company expects that it will then enter into discussions with the EPA concerning a further order for that purpose. On December 9, 1993, the Company entered into a Cooperation Agreement ("Agreement") with G.E. covering certain environmental matters at the Company's Waynesboro, Virginia site. One of the matters covered is the cost of responding to the Order. The Agreement provides that G.E. will bear 70.0% of the allocable costs relating to the Order. In 1993, the Company recorded a $1.2 million recovery from G.E. of previously incurred allocable costs relating to the Order. A dispute has arisen between the Company and G.E. concerning the Agreement. Management believes that the dispute will not have a material effect upon the financial condition, results of operations or liquidity of the Company. As a result of the continuing financial obligation which G.E. has with respect to releases at the facility and the protracted nature of the investigation, the Company believes that the costs of the investigation and study and any corrective action that may be required are not likely to have a material effect upon the financial condition, results of operations or liquidity of the Company. The Company has been notified by the EPA that it is one of 700 potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, for necessary corrective action at a hazardous waste disposal site in Greer, South Carolina. In prior years, the Company arranged for the transportation of wastes to the site for treatment or disposal. Based on information currently available, the Company believes its share of the costs of the investigation and any necessary corrective action is not likely to have a material effect upon the financial condition, results of operations or liquidity of the Company. Other matters: In the ordinary course of business, the Company is party to various environmental, administrative and legal proceedings. In the opinion of management, the Company's liability, if any, in all pending litigation or other legal proceedings, other than those discussed above, will not have a material effect on its financial condition, results of operations or liquidity of the Company. Note 9: RELATED PARTY TRANSACTIONS G.E. is one of the principal stockholders of the Company. Sales by the Company to G.E. and its affiliates amounted to $4.6 million, $4.6 million and $6.5 million in 1994, 1993 and 1992, respectively. Amounts receivable from G.E. were $1.8 million and $1.7 million as of January 1, 1995 and January 2, 1994, respectively. Decision Data Holdings, Ltd., ("Decision Data"), one of the Company's customers, is a related party due to common ownership. Sales to Decision Data were $1.2 million, $1.8 million and $12.8 million in 1994, 1993 and 1992, respectively. Amounts receivable from Decision Data were $0.4 million and $0.2 million as of January 1, 1995 and January 2, 1994, respectively. Note 10: CERTAIN GEOGRAPHIC DATA AND SEGMENT INFORMATION The Company operates in one reportable business segment, the computer peripheral sales and services business. Printer products and services are delivered internationally through a network of subsidiaries located in Canada, Western Europe and the Pacific Rim. In addition, the Company has a manufacturing facility in Mexico which is operated as a maquiladora company. Transfers (sales) between geographic areas are accounted for at prices approximating market. Information regarding the Company's operations in the Pacific Rim, which are not material, has been combined with its European operations. Additionally, information regarding the Company's Mexican subsidiary has been combined with its U.S. operations because of the vertical integration and its close proximity to the United States. Financial information by geographic area: (in thousands)
United States Fiscal Year 1994 and Canada Europe Eliminations Consolidated Sales to unaffiliated $ 174,455 $ 59,342 $ 233,797 customers Transfers between geographic areas 41,821 $ (41,821) Total sales $ 216,276 $ 59,342 $ (41,821) $ 233,797 Operating income (loss) $ 9,262 $ (94) $ 9,168 Identifiable assets $ 97,517 $ 29,750 $ 127,267
United States Fiscal Year 1993 and Canada Europe Eliminations Consolidated Sales to unaffiliated $ 159,504 $ 62,361 $ 221,865 customers Transfers between geographic areas 43,519 $ (43,519) Total sales $ 203,023 $ 62,361 $ (43,519) $ 221,865 Operating income (loss) $ 6,134 $ (3,489) $ 2,645 Identifiable assets $ 104,461 $ 36,698 $ 141,159
United States Fiscal Year 1992 and Canada Europe Eliminations Consolidated Sales to unaffiliated $ 158,646 $ 64,046 $ 222,692 customers Transfers between geographic areas 41,756 $ (41,756) Total sales $ 200,402 $ 64,046 $ (41,756) $ 222,692 Operating income (loss) $ 11,552 $ (3,036) $ 8,516 Identifiable assets $ 110,554 $ 36,252 $ 146,806
Total sales to customers outside the United States amounted to $72.3 million, $73.5 million and $77.0 million for 1994, 1993 and 1992, respectively; these amounts include export sales from the United States of $1.5 million, $1.5 million and $3.0 million in 1994, 1993 and 1992, respectively. Note 11: SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data)
Quarter 1994 First Second Third Fourth Revenues $ 55,336 $ 59,325 $ 57,350 $ 61,786 Operating income 1,322 3,196 2,408 2,242 Net income 94 1,502 486 488 Earnings per share: Primary 0.01 0.13 0.04 0.04 Fully diluted 0.01 0.13 0.04 0.04
Quarter 1993 First Second Third Fourth Revenues $ 56,677 $ 55,043 $ 53,973 $ 56,172 Operating income (loss) 1,569 2,191 451 (1,566) Net income (loss) 83 39 (1,669) (1,682) Earnings (loss) per share: Primary 0.01 0.00 (0.16) (0.16) Fully diluted 0.01 0.00 (0.16) (0.16)
Note 12: SUBSEQUENT EVENT - BUSINESS ACQUISITIONS Printer Systems Corporation - --------------------------- On February 16, 1995, the Company acquired Printer Systems Corporation ("PSC"), a privately held company whose primary business is the design, manufacture, distribution and support of printer products for commercial customers. PSC, which is headquartered in Gaithersburg, Maryland had 1994 revenues of $10.0 million. Pursuant to the purchase agreement, the Company acquired substantially all of PSC's outstanding common and preferred shares for consideration aggregating to potentially $4.8 million. Of the consideration $0.8 million was payable at closing and $1.2 million is payable over the three years subsequent to closing. Payment of the remaining balance of up to $2.8 million in consideration is contingent upon attainment of performance objectives during the three years subsequent to closing. The purchase price will be funded from the Company's cash flows from operations and credit facilities and the acquisition will be accounted for as a purchase. Harris Adacom Network Services, Inc. - ------------------------------------ On March 1, 1995, the Company acquired substantially all of the assets and certain liabilities of Harris Adacom Network Services, Inc. ("HANS"), including all of the stock of its Canadian subsidiary, Harris Adacom Inc. for cash and notes totaling $7.3 million. The assets acquired relate to HANS's service depot facility, field service operations, systems integration business, and network diagnostic and monitoring operations. The purchase price will be funded from the Company's cash flows from operations and credit facilities and the acquisition will be accounted for as a purchase. In 1994, revenues from the acquired operations totaled $36.1 million. Board of Directors: Don E. Ackerman Chairman of the Board President Chandelle Ventures, Inc. Bruce K. Anderson General Partner Welsh, Carson, Anderson & Stowe Edward E. Lucente Marketing Consultant Paul T. Winn President and Chief Executive Officer GENICOM Corporation Executive Officers: B. Garrett Buttner Vice President and General Manager Supplies and Service Marketing & Sales Lee P. Chu Senior Vice President Integrated Network Services Business James C. Gale Senior Vice President Finance and Chief Financial Officer Arthur D. Gallo Vice President and General Manager Page Printer Business James A. Jones Vice President, Corporate Controller and Treasurer C. Bruce Meyer Vice President Human Resources and Corporate Communications Michael J. Shelor ESSD Vice President and General Manager Service Logistics & Operations Raymond D. Stapleton Senior Vice President International Service Market Development Paul T. Winn President and Chief Executive Officer Corporate Directory Operations Management: Donald J. Einecker Vice President and General Manager Datacom de Mexico, S.A. de C.V. Michel Fargier Acting General Manager GENICOM S.A., France Stuart Fathers General Manager GENICOM Pty. Ltd., Australia C. Edward Feaster Assistant General Manager International Operations Klaus Fuchs General Manager GENICOM GmbH, Germany Russell M. Gerhard Vice President Engineering Bruce Glashan President Harris Adacom Inc. Tony Hammell General Manager GENICOM Limited, United Kingdom Dennis M. Harbin General Manager Relay Products Division Steve Mosek General Manager GENICOM Canada, Inc. Harold I. McIlroy Vice President Quality and Customer Satisfaction Richard B. Songer ESSD Vice President and General Manager Field Service Remigio Uttini General Manager GENICOM SpA, Italy Company Facilities: Headquarters: GENICOM Corporation 14800 Conference Center Drive Suite 400, Westfields Chantilly, Virginia, USA 22021-3806 Telephone: (703) 802-9200 Service and Manufacturing Operations: GENICOM Corporation One Genicom Drive Waynesboro, Virginia, USA 22980-1999 Telephone: (703) 949-1000 Enterprising Service Solutions Corporation 2 Crosby Drive Bedford, Massachusetts, USA 01730 Telephone: (617) 275-2777 Harris Adacom Network Services 1100 Venture Court Carrollton, Texas, USA 75006-5412 Telephone: (214) 386-2000 Datacom de Mexico, S.A. de C.V. Carretera a Matamoros con Brecha E-99 Apartado Postal 775 Parque Industrial Reynosa Reynosa, Tamaulipas, Mexico 88780 Telephone: (210) 682-9211 - U.S. Number (89) 227035 - Mexican Number Research and Development Operations: Printer Systems Corporation 207 Perry Parkway Gaithersburg, Maryland, USA 20877 Telephone: (301) 258-5060 International Sales and Service Operations: GENICOM Pty. Ltd. 175 Gibbes Street, Unit 12 Chatswood, N.S.W. 2067 Australia Telephone: 61-2-417-6411 GENICOM Canada, Inc. 5170-A Timberlea Boulevard Mississauga, Ontario Canada L4W 2S5 Telephone: (905) 625-0770 GENICOM S.A. 17 Rue Ampere 91300 Massy France Telephone: 33-1-69-308484 GENICOM GmbH Oberliederbacher Weg 42 65843 Sulzbach/Ts. Germany Telephone: 49-6196-70320 GENICOM SpA Via Achille Grandi 12 20093 Cologno Monzese Milan, Italy Telephone: 39-2-27304510 GENICOM Limited Unit B13 Armstrong Mall Southwood, Farnborough, Hampshire, GU14 ONR United Kingdom Telephone: 44-1252-522500 Harris Adacom Inc. 100 Commerce Valley Drive E Toronto, Canada L3T 7R1 Telephone: (905) 882-2500 Independent Accountants: Coopers & Lybrand L.L.P. 1800 M Street, N.W. Washington, D.C. 20036 Registrar & Transfer Agent: First Union National Bank of North Carolina Shareholder Services Group Two First Union Center Charlotte, North Carolina 28288-1154 Legal Counsel: McGuire Woods Battle & Boothe L.L.P. One James Center 901 East Cary Street Richmond, Virginia 23219-4030 Stock Trading: GENICOM's common stock is traded in the over-the-counter market and quoted on The Nasdaq Stock Market (Symbol: GECM). As of February 3, 1995, there were approximately 557 shareholders of record. The following table sets forth, for the periods indicated, the high and low closing prices per share of GENICOM common stock as reported by Nasdaq:
1994 1993 ------------- --------------- High Low High Low ------ ------ ----- ------ First Quarter $1 5/8 $1 1/16 $ 2 $ 1 1/8 Second Quarter 2 3/8 1 3 1/2 1 5/8 Third Quarter 3 1/4 1 3/4 3 1/2 1 1/2 Fourth Quarter 2 7/8 1 7/8 1 5/8 1 3/16
SEC Form 10-K: If you would like a copy of our Annual Report on SEC Form 10-K for the fiscal year ended January 1, 1995, you may obtain it without charge. Direct your request to GENICOM Corporation, Investor Relations Department, 14800 Conference Center Drive, Suite 400, Westfields, Chantilly, Virginia, USA 22021-3806 or call the GENICOM Corporation Investor Relations Department at (703) 802-9200. Corporate and Investor Information: Please direct inquiries to GENICOM Corporation, Investor Relations Department, 14800 Conference Center Drive, Suite 400, Westfields, Chantilly, Virginia, USA 22021-3806 or call the GENICOM Corporation Investor Relations Department at (703) 802- 9200. Annual Stockholders' Meeting: The Annual Stockholders' Meeting of GENICOM Corporation will be held on Thursday, April 27, 1995, at the Company's Headquarters, 14800 Conference Center Drive, Suite 400, Westfields, Chantilly, Virginia, USA 22021-3806. A Form of Proxy and Proxy Statement is being mailed to stockholders of record with this report. Equal Employment Opportunity Policy: GENICOM Corporation is an equal opportunity employer. It is the policy of the Company to recruit, hire and promote without regard to race, color, religion, sex, age, national origin or disability status as a disabled veteran or veteran of the Vietnam Era. Environmental Policy: GENICOM has a long-standing commitment to high standards of employee health and safety and environmental protection. It is the policy of GENICOM to manage its plants and activities so that employees' health and safety on the job are protected from unreasonable risks, so that employee expectations concerning the work environment are met, and so that the environment is properly protected from adverse effects of facility operation or from use of the Company's products and services. The Company is committed to offering products and using processes that will help solve environmental problems. EX-22 6 LIST_OF_SUBSIDIARIES Exhibit 22 SUBSIDIARIES OF REGISTRANT Jurisdiction Subsidiary of Incorporation - ------------------------ --------------- GENICOM International Holdings Delaware Corporation GENICOM International Sales Corporation Delaware Enterprising Service Solutions Delaware Corporation Delmarva Technologies Corporation Delaware Rastek Corporation Delaware Rastek Japan Ltd. Japan GENICOM Relay Products Corporation Delaware Printer Systems Corporation Virginia Printer Connection, Inc. Virginia Printer Systems International, Inc. Virginia Harris Adacom Inc. Canada GENICOM Canada, Inc. Canada GENICOM Foreign Sales Corporation U.S. Virgin Islands GENICOM Euro Holdings B.V. The Netherlands Datacom de Mexico, S.A. de C.V. Mexico GENICOM International Limited England GENICOM (No. 1) Limited England GENICOM Ltd. England GENICOM S.A.R.L. France GENICOM S.A. France GENICOM GmbH Germany GENICOM S.p.A. Italy GENICOM (Australia) PTY LTD. Australia GENICOM Pty Limited Australia E - 36 EX-24 7 CONSENT Exhibit 24 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of GENICOM Corporation and Subsidiaries on Form S-8 (FILE Nos. 33-49472 and 33-53843) of our report dated January 31, 1995, except Note 12, for which the date is March 1, 1995, on our audits of the consolidated financial statements and financial statement schedules of GENICOM Corporation and Subsidiaries as of January 1, 1995 and January 2, 1994 and for the three fiscal years in the period ended January 1, 1995, which report is included on page F-2 in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. - ------------------------ Coopers & Lybrand L.L.P. Washington, D.C. March 31, 1995 E - 37 EX-27 8 FINANCIAL_DATA_SCHEDULES
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K FOR THE YEAR ENDED JANUARY 1, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 12-MOS JAN-01-1995 JAN-02-1994 JAN-01-1995 673 0 37,846 (1,479) 43,368 86,927 88,755 (62,540) 127,267 46,147 47,192 106 0 0 27,977 127,267 166,518 233,797 120,455 173,894 50,735 0 7,458 3,618 1,048 2,570 0 0 0 2,570 0.23 0.23
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